So you're thinking of investing in condo in Toronto or the GTA! You're not alone: close to 20% of condo owners in the city are investors.
If you've never invested before, it can seem pretty intimidating. There's a lot to keep in mind, from finding the place that will give you the best return on your investment, to renting it out, to being able to swing a 20% down payment.
At CondoGo real estate brokerage, we also work with a lot of investor so we put together a list of the mistakes which we think you might want to consider when thinking about investing.
Mistake #1: Not being ready to buy right away.
The slow condo market we saw in late 2020 is gone: Buyers who doesn’t act fast on a great condo unit may lose out. You have to have everything in place so you can make quick decisions and act quickly. That includes having your down payment liquid and ready to go, having all your finances in order and being prepared to make an offer right away.
The market has gotten super competitive again. Be ready for same-day visits, making decisions on the spot, offering more than asking and even might want considering bully offers as a tactic, since condo sellers are going back to using offer dates to drive up price.
Mistake #2 Assuming buying an investment property is a “now or never” thing.
You read about the condo market heating up and wonder if you've missed the boat to make a profit. But before you rush out to buy, keep in mind that if you buy an investment property, you don't need to be ready to move in by a certain date. So it is OK to take your time: more units are on the way. Stay up to date on what’s happening in the real estate market.
Don’t forget we're still in a pandemic. There are still a lot of sellers out there who haven't listed. They may not want people in their unit right now or their tenants are refusing showings. The building may not be allowing showings. Or they simply don't want to ask their tenants to leave right now.
Mistake #3: Overlooking “stale” listings.
It’s not unusual for buyers to assume that listings that have been around for 30, 60 or 90 days have problems, but many of them are actually worth a closer look. It's possible that a unit hasn't been staged or the listing photos are terrible. Maybe there are 12 similar units in the building that are all for sale. Maybe it needs work, or the tenants left it in mess and the owner doesn't live locally. It could be any one of those things, It could be anything.
They may not be staged or in the best condition, but that can make them a great value. Often the savings you can get are far greater than what you’d spend fixing it up.”
Mistake #4: Assuming you have to have 20% to put down.
As an investor buying a resale unit, you do have to put at least 20% down. But buying into a pre-construction project is a whole different story. While the deposit on a pre-con unit is generally around 20%, but you'll have a few years to pay it off. And as a buyer with existing equity in a home, you can use that equity to finance your down payment.
Mistake #5: Expecting to make a lot of money in a short time.
Real estate investing is a long game. It's impossible to time the market in a way that will guarantee you a profit in a few months or a year. If you go into an investment knowing you'll be holding on to it for a few years, that's your best bet for solid ROI.
Mistake #6: Charging rent that's too high.
Right now, the amount you can charge may not cover all your costs. With so many landlords offering discounted rents and even incentives like free months and free Internet, rents are at their lowest in years. But remember that even if you have to cover some of the costs yourself, you aren't throwing that money away. You're putting it towards your investment. Rents will go up again when immigration resumes and students come back to the city, so it's not something you have to live with forever.
Mistake #7: Not working with an agent who specializes in investment properties.
Working with a full-time agent who’s in it every day and really understands how to determine value is the only way to succeed as a first-time investor. You need someone who has their finger on the pulse, and is an area and property type expert. These are the agents who can get you into a great property and get you started as an investor.
Interested in investing in the Toronto or GTA condo market?