Real Estate Investors: Should You Buy a Condo or a House?
When it comes to investing in Toronto real estate, one of the big decisions you’ll need to make is whether to invest in a condominium or house. Below, we look at the pros and cons of each type of real estate investment.
Investing in a Condo
Pros
- Less expensive to buy – the average price of a condo is lower than the average price of a house in the GTA
- Low maintenance – With the condo board responsible for most of the building’s mechanical systems and the ongoing maintenance of things like window cleaning and snow removal, owning a condo as an investor is relatively easy.
- More predictable repairs and maintenance costs – With a condo, the board performs regular studies about what needs to be fixed and costs are planned for and shared among residents.
- Cheaper property management fees – If you decide to hire a property manager, it’s less expensive in a condo than in a house. In Toronto, we often see property management costs of 6-8% for condos, and 10-12% for houses.
- Rentability – With most Toronto condos located in prime neighbourhoods, it can be easier to find a tenant. Close proximity to transit, services and jobs are key decision factors for tenants. Condo amenities like gyms and pools can be very attractive to tenants too.
Cons
- Condo rules and restrictions – Condo board rules may limit if and how you can rent your property – for example, they may require leases of 12 months or more.
- Maintenance Fees – Condo fees can range anywhere from $0.60-$1.00 per square foot, so if you decide to invest in a larger unit, condo maintenance fees can get expensive fast
- Special assessments and condo fee increases – Investing in a condo isn’t risk-free, and legal, structural or financial problems in the building can have serious consequences on the owners. Whether they deal with building issues via one-time special assessments or higher-than-average condo fee increases, it can throw off your math.
Investing in a House
Pros
- Higher property appreciation – Houses in Toronto have traditionally shown greater value gains faster than condos, so if one of your investment goals is property appreciation, you’ll want to carefully consider a house.
- More improvement opportunities – If one of the ways you want to increase your investment ROI is through renovations, a house can provide more options, whether that’s adding bathrooms, finishing the basement, adding an extension or topping up.
- Control – Owning a house instead of a condo means you aren’t subject to the condo board’s rules or decisions and are the captain of the ship.
Cons
- Higher cost to buy – It’s generally more expensive to buy a house than a condo, so buying a house means a bigger downpayemnt and higher ongoing mortgage costs
- Higher ongoing costs, from garbage, water and utility costs to insurance.
- Repairs in a house are harder to predict and can get expensive fast – whether that’s replacing a roof, getting new water drains, dealing with a flooded basement or calling in a plumber or electrician.
- Ongoing maintenance for a house can be onerous, from managing pest control, furnace and air conditioner maintenance, window washing, snow removal, gardens and more. House maintenance isn’t just about money – it takes time too.
