Best investment property: condo vs house?
Finding a suitable investment property in Toronto can be challenging. Even though condo rental market is growing in Toronto, detached house investments look more lucrative to many buyers.
[sharify]
When Torontonians paint a picture of an investment property in their heads, they don’t usually think about condominiums. Condo investments might not look as attractive as they did in the past. However, they might be much better than Torontonians think.
When you consider renting out a detached house, there are many additional concerns. Wear and tear, maintenance costs and high mortgage payments are among the many things that the landlord has to worry about. If there is a water leak or a broken appliance, it is the responsibility of the landlord to be available and cover the costs. With condo rental, you do not need to worry about external or most of internal maintenance. No sidewalks to shovel, no lawns to mow, or weeds to control. Enjoying these benefits comes at a price, and I can assure you that condo fees can bite. However, choosing the right condominium will help you to leverage the fees. Let’s see if returns from your investment on a house would outweigh the benefits of renting out a condo.
House vs condo rental prices
Houses cost more than condos and require a much larger down payment and a lot of maintenance at the expense of the landlord. In addition to maintenance costs, landlords often lose on rental prices, as compared with their mortgage payments. Let’s look at a specific example. A 3,000 square foot detached house in Richmond Hill worth a million and a half can be rented out for about $2900 – $3300. Guess what, a two-bedroom, 850 square foot condo in downtown Toronto would generate the same amount, but the price of this condo could be twice as little. The typical rental tag for both properties would be somewhere around $2,900.
Even if you rent out individual bedrooms in an investment house, they would generate less income than a similar square footage condo rental. Say, one bedroom in a house in a good area of Toronto would go for approximately $1,600 per month. A similar square footage condo in the same area could be rented out for $2,100. Of course, you can consider renting each room in the house, but that’s will be illegal unit so we won’t go into the details.
Also, due to the price difference you need to place lower down payment amount and with professional help can obtain several condos instead of a single home. So, for the same amount of down payment you can receive better diversification and ultimately higher cashflow.
Additional factors to consider
Condo rental market in Toronto is rapidly growing. In order to make a great investment which would generate good returns, you have to take many factors into account. Returns would depend on public access to amenities and transit, safety and future development plans in the neighbourhood. Investors also must review and understand the condo corporation financial statements. Skipping this important factor may destroy your investment portfolio and diminish any cashflow and value of your investment.
Are you looking to invest in a property? Finding a suitable investment can be challenging. Our team can answer your mortgage related questions, tell you exactly how much you can afford to borrow and find the most competitive rate. And our long-term real estate investment experience can help you in choosing the right investment that fits your investment strategy. We will guide your search from the beginning until the closing day, and make it a smooth experience.
For any questions feel free to call our office.
Contact us today for a free no-obligation consultation.
[sharify]
Recent Posts