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Many real estate investors ask this question Whether Condos Are A Good Investment Or Not? If you’ve been reading the real estate market news or review in the past few years, you’ve seen tons of examples of enormous profits that Condo apartment investors have gained. Here we’ll discuss what is a good investment. Also we’re going to explain what’s the reality and what you should expect from a good investment. And at the end we’ll review an average example of a condo apartment investment.

ARE CONDOS STILL GOOD INVESTMENTS?

First of all to know about condo investment and real estate investment in general, to know what drives the market, I suggest you read these monthly analyses. In the past couple of months we, as some of the Top Toronto Real Estate Agents have helped buyers and investors to either buy investment properties while the competition is low, and or rent out their investment properties to qualified tenants. If you are a first time condo buyer, you can find out more about how to afford a condo on this page.

What is a good real estate investment?

Let’s review the basics of Condo investment and real estate investment and how a Condo investor evaluates if a condo investment is a good investment. Rate of return (ROI) is one of the main profitability indicators. Higher the return, more attractive and better is the condo investment. Investing in real estate assets is in some ways similar to investing in other markets, and is different in other ways. Liquidity and Term are the main differences that separate Real Estate Investments from other types of investments. ( Such as Bonds, Stocks, etc.) When it gets to real estate, you have a wide variety of options, from Walk ups to Detached Houses to Condo Apartments.

Read More : Most Profitable Real Estate Investments in Toronto

Is investing in Condos a good idea?

First we’ll review the numbers and average condo apartment price in Toronto. Toronto has been a good place to invest in Condos, especially in the past decade. Condos have been proven to be very good investments in the Greater Toronto Area, especially the city of Toronto. The numbers that we analysed are in our database ( TREB’s ) since January 1996. Starting with the most recent, as you can see in our monthly Toronto real estate Market News here, the average price of a condo in Toronto has been $729,005 in August 2024. The Average time that a condo investor holds onto their condo investment is around 5 years. However in the past few years because of the very high gain in Condo investments, the condo investors were willing to cash out or use their equity within 2-3 years of initial purchase, especially those who bought their investment condo before 2017. In the next section we’ll review the overall price growth in Condo investments.

Toronto Condo Investment Gains:

To know if investing in condos is a good idea, look at the below average Condo Price appreciation chart. The chart depicts the average condo price from January 1996 till the last month.

Read More: Benefits of Renting Out Condo Apartment

During the times that the market went rough for a while (i.e. 2008-2009) you see some fluctuations. However, whatever happened in the market, the condos were among the fastest property classes to rebound quickly. Interesting fact: The average price of a condo in Toronto in January 1996 has been $133,602. The beginning of May 2020 also the average price of a condo in Toronto was $578,283. The Appreciation is OVER 332% which is almost 14% Average Appreciation every year since 1996. Do you know any other investment with a high level of Security with a higher return more than that? If so, please leave us a comment down below. Since for many of the condo investors the average investment terms are about 5 years, look at the past 5 years trend. The average price of a condo apartment in 2015 has been $380,728. Thus the appreciation is 52%. Which shows the average price appreciation on condos in Toronto has been over 10% a year. Remember that these average appreciations are on the Total price of the condos. Whereas investors could buy investment condos with as low as 20% down payment (if approved for the mortgage).

Why are Condos a Good Investment in Toronto?

Toronto’s real estate market is one of the hottest in Canada, and condos have long been a popular investment choice for both local and international investors. However, before diving into the market, it’s important to assess whether condos are a good investment in Toronto and what factors make them appealing to Toronto investors.

1. High Demand for Toronto Condos

Toronto’s growing population, coupled with its limited land availability, has contributed to a high demand for condo units. In recent years, many young professionals, first-time homebuyers, and downsizers have turned to condos as a more affordable option compared to detached homes. The ongoing demand makes Toronto condos a potentially lucrative investment for those seeking rental income or long-term property appreciation.

2. Affordability Compared to Houses

One of the biggest advantages of investing in a condo in Toronto is affordability. Condos are typically priced lower than single-family homes or townhouses, making them a more accessible entry point for real estate investors. With the average price of a condo being significantly lower than a detached home in Toronto, condos offer an opportunity to own property in a competitive market without the steep price tag.

3. Rental Income Potential

Toronto has a robust rental market, especially in downtown and transit-connected neighborhoods. Toronto investors who purchase condos in high-demand areas can benefit from steady rental income due to the city’s low vacancy rates and strong demand from renters. In neighborhoods like Liberty Village, King West, and downtown Toronto, condos are highly sought after by young professionals and students, providing a solid rental market for investors.

4. Appreciation and Market Growth

Historically, Toronto condos have shown solid appreciation, especially in well-located areas. Toronto is a growing city with increasing immigration, which supports long-term property value growth. Toronto investors often find that condos in popular areas appreciate well over time, leading to capital gains.

5. Pre-Construction Condos: High Upside Potential

Investing in pre-construction condos is another way Toronto investors can potentially see significant returns. When buying pre-construction, investors purchase at today’s prices, and by the time the building is complete, the condo’s value may have increased. However, this comes with risks such as project delays or market fluctuations, so it’s essential to do thorough research.

6. Lower Maintenance Responsibility

One advantage of owning a condo compared to a freehold property is the lower maintenance responsibility. Condo owners pay monthly fees that cover building maintenance, amenities, and repairs, which can be beneficial for investors who want a more hands-off approach.

7. Considerations: Condo Fees and Special Assessments

While condo ownership has its benefits, it’s important to be mindful of condo fees. These monthly fees cover building maintenance, amenities, and reserve funds. Over time, fees can increase and impact your return on investment. Additionally, special assessments may be levied to cover major repairs, adding unexpected costs to condo ownership.

8. Potential Risks

Market Volatility: Toronto’s condo market can be volatile. While long-term growth has been strong, short-term fluctuations in the market can affect property values.
Oversupply in Certain Areas: Some parts of Toronto may experience an oversupply of condo units, which can lead to slower appreciation or difficulty in renting or selling.

Condos can be a good investment in Toronto, particularly for those looking for rental income or long-term appreciation. High demand, affordability compared to houses, and the potential for steady rental income make condos appealing to Toronto investors. However, investors must be mindful of condo fees, market risks, and perform thorough research before making a purchase.

If you’re considering investing in Toronto real estate and want to learn more about the condo market, feel free to contact us for expert guidance and advice on how to navigate Toronto’s dynamic real estate landscape.

We’ll match you with a Top Real Estate Agent from One of the Top Brokerages. Submit the request here in a few seconds.

Condo Investment Example:

A condo investor can purchase a condo with as low as 20% down payment ( subject to mortgage approval). An average condo purchased with $380K ( average price of a condo 5 years ago) with 20% down payment. Means the equity invested as down payment was around $76K, plus legal costs and land transfer taxes around $6K.

After 5 years, the average condo price is $658K. So the price appreciation is $285K and how much cash did you pay for the down payment? $76K+6K = $82K, and you gained $198K in price appreciation on your first $82K down.

That equals 241%! Which translates to 48% A YEAR! Do you know any secure investment with that Return? If so please let us know in the comments, we’d be interested to know about it!

** I didn’t count the Rental income that pays the mortgage, and Mortgage Principal Payoff that usually is more than the taxes and maintenance fees, for the ease of calculations and quicker better understanding.

Read More : Which is a Better Investment To Buy, an Old or a New House?

Downtown Toronto Condo Investment Gains:

Downtown Toronto has been a great place for condo investors. Investing in downtown Toronto comes with high appreciation, and a high demand in the rental market. The way that most of the condo investors in downtown Toronto can rent their condos very quickly. Let’s look at the average price of condos in downtown Toronto.

In downtown Toronto, the average condo price in Jan 1996 has been $201K, and beginning of May 2020, $700K. Which is 248% price appreciation. Equals to Over 10% appreciation a year. As you can see the Downtown Toronto Condo apartments have a higher appreciation compared to average Toronto Condos.

For detailed information about specific areas of Toronto contact us!

Is Any Condo Investment, A Good Investment:

Depending on what you need. If you buy a condo investment, and you have plans to live in it some time down the road yourself, you might want to choose a condo that fulfills your personal needs as well. For example if you are a swimmer, you might look for condo apartments which have a swimming pool, etc.

However if you are looking for purely investment purposes, you might find another condo attractive which has a higher Rate of Return. There are a variety of good buildings and some bad buildings in terms of investment. A Top Toronto Condo Real Estate Agent can help you find the right fit based on what you need. Some of the condos are flagged with some lenders, which a Top Condo REALTORⓒ can advise you to stay away or not based on your finances.

You can find a Top Toronto Condo Real Estate Agent here and ask your questions regarding the condo investment.

Read More :Mistakes To Avoid When Investing In A Condo

Why are Condos a Good Investment?

Condos Apartments in Toronto are being derived by 3 different types of Buyers. So the demand in the Condo apartment market is high, and very high chances that it would remain one of the highest among other real estate property classes.

A: First time buyers

Condo apartments are the most affordable options out there for first time home buyers. With Average price of around $578,000. Whereas the average price of a Detached house in Toronto is $983,000. As you see the price gap between an average Detached House and an average Condo Apartment in Toronto is over $400,000. So Condo apartments are very attractive as a starter home between First-Time home buyers.

For first-time home buyers, who are mostly Young individuals or Young Couples, the lifestyle that condos bring is attractive as well. Living near where you work, or having access to all kinds of amenities such as Gym, Pool, Etc. Plus normal housekeeping routines such as shoveling the snow, or landscaping also being taken care of by someone else. So affordability apart, the lifestyle is another factor, comes second though, that makes condo apartments attractive for first-time home buyers.

B:Real Estate Investors

Real Estate Investors drive the condo market as well. There are several reasons for that. First of all, real estate investors ( those who have purchased more than one property) are usually aware of the market and gains that condos got. So having a high rate of return ( both on Condo Price Appreciation and then on Cash Flow) made condos very attractive for Real Estate Investors.

Secondly, the ease of managing a condo investment. If you have a house as an investment property, you still have to take care of the Landscaping, Snow removal, Repairs ( Major and Minor) such as Furnace, AC, Hot Water, Roof Shingles etc. WHereas in a Condo investment, the property management is going to take care of most of the maintenance and repairs related to the property. So a busy real estate investor, most likely chooses Condos as a big part of their real estate investment portfolio.

C:Luxury Real Estate Buyer

For some living specific lifestyles dictate living in a condo, and what’s better than a luxury condo? Condos in the central parts of Toronto, and specific pockets of Downtown Toronto can bring you that Status and Lifestyle you seek.

Some areas such as Yorkville are famous for these kinds of lifestyles. However there are many other condos in Downtown Toronto that fulfills those needs. Among them we can name many, such as Shangrila Toronto, or the well known KING Toronto Condos coming to King St West and would be a great landmark in Toronto.

Read More : Top Toronto Landmarks

Things to Consider When Buying A Toronto Condo

There’s a lot to think about when buying a Toronto home, and with Toronto condos, there may be a few extra factors to consider that you didn’t have to think about with single-family homes.

As a result, we recommend that prospective buyers consider each of the following factors before purchasing a condo.

Particular Restraints

Certain restraints, such as those limiting how you can use Toronto property, may apply depending on the Toronto condo community. While some condo associations prohibit renting, others impose various restrictions, ranging from pet restrictions to requiring regular lawn upkeep.

Make sure you are completely aware of the expectations before buying a Toronto condo to avoid unpleasant surprises later on. These rules and regulations differ significantly between managing companies.

Financial Issues

Financing a Toronto condo is similar to financing a single-family home, but it is often more difficult due to additional steps and paperwork.

This is primarily due to the condo community’s HOA or management company. When you apply for a condo mortgage, the lender is essentially approving both the buyer and the community for financing, and the process may take longer because the lender is waiting on specific documents from the HOA. Condo interest rates are typically slightly higher than those for single-family homes.

Fees for Condo Associations

Condo association fees are an important factor to consider when purchasing this type of property.

In addition to monthly mortgage payments and property taxes, Toronto condo owners must also pay monthly HOA fees, which should be factored into their monthly budget.

The Bottom Line

The pressure of finding the ideal home in the ideal location at the ideal time is great when buying Toronto real estate.

How can you tell if a condo is the right choice for you when there are so many factors to take into account? Condos are a popular choice for first-time home buyers and real estate investors alike because of their generally lower price tags, but before making an offer, be sure to take your budget, your intended use of the property, and the real estate market into account.

Are Condos A Good Investment?