Is now the right time to Invest in Resale Condominiums?

The case for Investing in Resale Condominiums in Ontario

As the Canadian real estate market navigates through challenging times, resale condominiums have emerged as a potential investment opportunity for those looking to diversify their portfolios and capitalize on the growing demand for affordable housing. Given the amount of supply available on the market and the downward price pressure, there are deals to be had if you know where to look.

Despite the current economic lockdown in the GTA condo market, as highlighted by the Urbanation-CIBC Condo Investment Report from July 2024, resale condos still offer unique advantages and the potential for long-term returns. Here are a few key reasons why investing in a resale condo in Canada might work for you.

Affordability

One of the primary advantages of investing in resale condominiums is their affordability. When compared to newly constructed condos and, depending on the age and/or developer, resale units are often available at lower prices per square foot and generally have more functional layouts. When compared to traditional single-family homes, the initial purchase price is also a smaller pill to swallow making it easier for first-time investors to get into the market.

Choice

Unlike pre-construction condos, which are bought off floorplans and may take years to complete, resale units are already built and ready for occupancy. This means that investors have the liberty to choose a unit that fits their investment criteria - whether that's a certain layout, floor level, exposure, or developer - and start generating rental income from day one. Given the current resale condominium landscape, there is no shortage of choice making it an opportune time for prospective investors to secure the ideal unit in their area of interest. By investing in a resale condo in a desirable location, investors can attract higher-quality tenants and maintain strong occupancy rates.

Transparency and Due Diligence

When purchasing a resale condo, investors have the opportunity to conduct thorough due diligence and assess the property's condition, financial health, and management. Buyers can review important documents such as the condominium's Status Certificate which will reveal the building's maintenance history, anticipated repairs, and financial stability. This transparency allows investors to make informed decisions, pinpoint mismanagement and mitigate potential risks, which is especially crucial for the long term viability of the investment in a market facing economic challenges.

Potential for Appreciation

While a lower cost to entry can help investors who are looking for cash flow and the opportunity to generate a higher rent yield, there is something to be said about the potential for appreciation. It is important to point out that resale condos may not appreciate as rapidly as new developments. Despite this, they still have the potential for long-term capital growth. Factors such as location, market conditions, and the overall quality of the building and it's management can influence the appreciation of a resale condo. By carefully selecting properties in desirable areas close to transit hubs or future development, investors can position themselves for potential price appreciation over time.

Market Insight

The market does not lie. Certain units are better suited for investors. One insight from the recent Urbanation report is unit size matters, especially if purchasing an investment condo with help from a lender. Here's why:

• Studio units were effectively cash flow neutral on average for condos completed in 2023.

• In comparison, negative cash flow averaged:

  • ($523) per month for one-bedroom units

  • ($734) per month for two-bedroom units

  • ($866) per month for three-bedroom units

• Only 3% of condos completed in 2023 that were held as rental investments were three-bedroom units.

Investing in a resale condominium in Canada can still be a viable financial decision for those seeking a balance of affordability, rental income, and long-term growth potential, even in the face of current market challenges. To make the numbers work, investors must carefully navigate the current economic landscape, conduct thorough research, assess their financial goals, and seek professional advice before making a purchase.

If you're considering investing in a resale condo in Canada, now is the time to take a strategic approach. Start by researching the local real estate market, identifying areas with strong fundamentals and potential for long-term growth, and connect with experienced real estate professionals (like us!) who can provide valuable insights and guidance.