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Are condos a good investment and worth buying? (what you NEED to know before buying)

“Always pick your yard based on your Summer lifetstyle.”

~ KARL

August 9, 2019 - Karl Yeh

Deciding if you should buy a condo and if it's worth investing in? In this episode, we discuss if condos are a good investment. We explore how your research is different when buying a condo as an investment. Finally, we see if a resale or a new condo is a better investment. 

 

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What we discussed:

Hi there, I'm Karl. Welcome to another Homebuyer's School video, a channel where you get the latest strategies, tactics, and tips from home-buying experts. And remember, if this is your first time on this channel and you want to get the latest strategies from the experts, hit the subscription [00:00:30] button below, hit the little notification bell so you don't miss anything.

Karl Yeh:                      

So today I'm joined by Karen McDonald, community manager with Brookfield Residential. And the question we're gonna answer is:

Are condos a good investment?

So, I know we talked about buying a condo for you to live in, but are condo was a good real estate purchase for investment?

Karen McDonald:         

Of course, yes they are. And in fact, they're probably the most common that people buy for investment as well too. [00:01:00]

Because they cater to people that are renters, that are looking for a certain budget amount to spend on their rent on a monthly basis and condos fit the bill for them.

So yes, they're an excellent investment.

I think as an investor, what you need to consider is the amount of time you want to own that property. Real estate is always best as a long term investment.

So if you're thinking of buying and selling within [00:01:30] a year or two, you're probably not going to make a huge amount of money depending on the market that you're in.

You need to factor in how long you want to keep that property, whether you can cover your costs in that property for your rent as well too.

And really knowing that reasonably, three to five percent, in a good market is what you're going to make on a yearly basis. So think long term, but they're perfect for investment.

Research when buying condos as an investment

Karl Yeh:                      

So, what kind [00:02:00] of research do you do, which is I guess a little bit different than actually researching to buy, when you're actually buying condos as an investment?

Karen McDonald:         

Yeah, as an investment, it's a lot more of the practicalities of things, right?

So when you're looking at a property as an investor, you're probably not going to put all of the things that you would want personally in that home because you need to keep costs low.

Make it appealing enough for your renters [00:02:30] to want to rent from you, but still making it so that it's practical for you on a monthly basis.

That you're not expanding too much over and above what you're asking for your rent.

Karl Yeh:                       So, obviously you'd probably want some sort of target renter-

Karen McDonald:          Yeah.

Karl Yeh:                      

That you'd want, right? So between a person who maybe wants to be close to work, and I know we talked about living [00:03:00] in a condo in terms of getting to know your neighbors, that also has to factor in thinking what type of person you want renting your condo.

Karen McDonald:         

Yes, absolutely.

And I think it's depending on where you are, number one, location, where you're looking.

But who's who's buying in that building as well too?

What kind of, if you're in a community, do they have family that lives close?

That might be something that people want as well. It might even determine whether you buy a townhome or a condo.

Because if you're wanting [00:03:30] families, if you want young families, or young couples to buy, you're probably more they're a larger condo, or a town home, compared to something like if you want to rent out to somebody that is just wanting to be close to family and they just want a certain amount of space, just a single senior, something like.

That that's very quiet. Apartment style is a little bit better for that.

Karen McDonald:         

But absolutely. Who do you want to rent out the home to? What's the demographic? [00:04:00] If you're close to universities, you're going to be university students. You're going to have that. It's going to be a roommate kind of situation.

Or if you want somebody that just has two income, no kids, you don't want anything on the walls or anything like that with kids, then that's probably something you have to factor into. Larger condo, town home.

 

Karl Yeh:                      

Yeah. But I guess it also depends. You talked about the university students, right? What's the turnover rate?

Karen McDonald:          Oh, I think it's probably pretty high.

Karl Yeh:                       Yeah.

Karen McDonald:         

For that. [00:04:30] You're looking at they're in for three or four years, maybe within that the roommates change. Relationships change.

Maybe they get into something, they want to move in with their partners, whatever that is. And so, I guess that's something. High turnover in rent.

Karl Yeh:                       Or they graduate and they-

Karen McDonald:          Exactly, and they move away.

Karl Yeh:                       Yeah.

Karen McDonald:         

Yeah. So I think talking, interviewing your possible tenants, is just like anything else. You need to know [00:05:00] what their plan is as well too. And aside from walking them into a five year lease.

Probably not.

Karl Yeh:                      

In terms of leases, is there a set lease? One year, two year, three year? Does it matter?

Karen McDonald:         

Yeah, always. And your landlord will determine that as well too. The landlord, you can set the terms as a landlord.

I mean when people are looking at brands, they typically look at whether it's a one year, two year lease anyways. And they'll already determine whether they want to contact you based on what you've put [00:05:30] in your ad.

Karl Yeh:                      

Which is a better investment, a new condo or resale?

I would think it would be new, but ...

Karen McDonald:         

New and resale depends on location, right?

So, if you want something inner city, then location is where you're going to buy. It's going to cost you a little bit more.

New for an investor, I think you have some protections as far as warranties go. So that's always something that you want to take into consideration.

Warranties, a lot of the times  new warranty can [00:06:00] be up to 10 years for your apartment, condo.

And so, just as an investor from a cost standpoint, that'll save you some money if any issues go wrong as well too.

So yeah, there's benefits to both location being the main one and resale, warranties being the main one and new.

Question of the day

Karl Yeh:                      

So the question of the day I have for you is:

Did you buy a condo as an investment and why? And did it provide a good return?

Let us know in the comment section below. [00:06:30] And if you want to know more about buying a condo, check out our condo buying playlist here as well as other home buying videos here. And don't forget to subscribe to keep learning from the experts. We'll catch you in our next video.

 

Your turn:

Let us know if you have additional condo and/or home buying related questions that we can answer by submitting them in the comments section below. 

Homebuyer's School publishes new content weekly so subscribe or check back regularly for the latest information, strategies and tips from home buying experts.  

About Karen McDonald:

This is my 12th year with Brookfield Residential.  I have been involved in 8 sites now with 7 in multi-family and 1 Single Family.  I received my certification as a New Home Sales Professional from PHBIA in 2008. 

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