Condos for the Investor

Investors flock by the hordes whenever a new preconstruction development is announced. And in a city like Toronto, new developments are popping up everywhere. But how do you know which building and unit to invest in? With so many options, making a decision can be daunting. But if you plan to make money off of this project, you need to make smart choices. Plenty of investors end up in the hole…at the same time; plenty of investors come out on top. So what separates them?

Condos Often Suck

You have to think for a second about the condo market, pre-construction, and how it all works. Pre-condo developments are built with the investor in mind; they aren’t built with the home buyer in mind. Investors buy pre-construction condos based on plans and plans alone. And the majority of investors don’t think to involve themselves in the plans, or ask for changes and unique alterations. Developers can essentially build whatever they want, and trust me; they don’t always have a “comfortable living space” in mind. Developers are working under deadlines, with limited resources, and tight budgets. They are trying to develop the property as quickly as they can in order to fill investor orders. So really, they could give a hoot about the living space itself. Developers can change plans on a whim, add whatever they want, remove whatever they want, and the investor sits there and watches it all unfold; as the investor, you don’t care. You only care about how much money you make, and you don’t plan to live in the space. You’re likely planning to rent the space out for a period of time and then sell it, or you’re thinking to sell as soon as the building is registered, as the price points will typically increase once the building is registered. As a result of these factors, there are a wealth of horrendously awful layouts, substandard common areas, unfinished buildings and more.

So the Developer is Marketing to the Investorwho just wants to make money. But as the investor, you really should be thinking about these factors. This is where investors end up with a bad investment. A unit that was developed for the investor, not for the buyer, will not have the features, layout and livability that a buyer is looking for. Now, you’re likely looking for a tenant right off the bat in any case. Great; tenants are less picky than buyers and may just be willing to rent your space. But what about when you’re ready to really cash in on your investment and actually sell the unit? Who wants to buy a tiny, unlivable unit in a horribly managed building? Good luck finding a buyer.

Condos All Look the Same as a result of these factors as well. Builders are trying to get the project done. They aren’t thinking about the desirability of the units, and they aren’t thinking about resale value. What happens to the unit once it’s sold to the investor doesn’t matter to the builder. They’ve already made their money. So the builders have no issues pumping out unit after unit based on similar, if not the exact same, layout and floor plans. The builder doesn’t care if there are massive stone pillars in the middle of the living room, preventing you from fitting a full sized couch in the unit. They don’t care if the “den” is nothing more than a walk in closet. They don’t care if 3 bedrooms are squeezed into a 900 square foot space. They care about fulfilling their orders.

So the Big Take Home Here is This:As an investor, you should be heavily researching the builder before anything. Does this builder have a good track record? Is there a good management team on board with this project, with an equally impressive track record? Are there strong plans for common areas and parking etc.? Once you’ve decided that the project has a good team backing it, you need to be heavily involved in the floor plans. Request tweaks, additions and changes. Set your unit apart from the other units in the building. Make sure the unit has enough space to comfortably live; if it’s a 3 bedroom space, make sure 3 people can actually live in the space without wanting to kill each other. Ask for upgrades in the kitchen and bathroom, and make sure there are no obstructions or ugly cosmetic features that need changing. These details will make all the difference when it comes time to sell and cash in on your investment. You wouldn’t buy a new car without test driving it first, right? So why would you buy a new condo without knowing exactly what it is you’re getting