Are condos worthwhile as an investment?

3 Replies

Hi there,

I live in the Kitchener-Waterloo region of Ontario, Canada.  There has been a lot of development here in the last few years and a lot of tech jobs coming to the area.  With the influx of people and jobs, they are building a lot of condominiums in the downtown areas.  I recently went to see one - ~560 sqft selling at $289,000 (The Charlie West development by Momentum Developments).  The presentation was good, the mock unit looked nice - I went back home and ran the numbers.  Based on current rents, average unit price appreciation, condos fees and property taxes - it would be a negative cash flow for the first 7-8 years, excluding planning for any repairs or vacancies.  But apparently the majority of this building is already sold out, with over 50% of the units being investors.

I sent an email to the agent that had taken us through the presentation - and she agreed the numbers were likely accurate but I should be looking at this with a "long term view of the price appreciation and someone paying the majority of my rent".

I'm wondering what the consensus is on 1 bedroom condos for renting, and the idea of negative cash flow?  I already have a duplex I rent with over $250/m in positive cash flow.  Everything I've ever read regarding real estate has warned of the idea of negative cash flow.

Please let me know your thoughts, opinions, ideas.

Thanks. 

Unless I'm very mistaken it's not cash-flow negative because it's a condo, but because it's a new build. Don't buy new, and don't buy cashflow negative. I would even resist the urge to just break even, you never know how long a dip in the market can last and you don't want to already be hemorrhaging money when (note: I didn't say "if") it happens.

Another thing to worry about with Condos is that there could be restrictions to leasing it out because of the HOA. Make sure to read the rules and regs of the complex you ever want to purchase in.

@Jordan Gillespie Exercise caution when getting advice on Canadian RE on BP because most of it will be American-specific as this is an American site. 

FYI: I was a long-term resident of the GTA and have family/friends all over Southern Ontario including your area. 

The Kitchener-Waterloo market is super hot and will continue to remain hot due to jobs and because it is more affordable than most other options (vs. west-side of GTA). 

You raise an interesting point about being CF negative for the first 7-8 years but that is/has been the reality of the condo market in your area for some time now. 

You can look into London, Windsor and surrounding towns for better options. But you will not be hitting, on average, the #s you hear folks in the US getting. This is primarily because of the multitude of properties (available at various price points) and attractive financing. 

The Canadian section of the forums has a few threads with active RE investors in/around your market. Would highly recommend connecting with them.

@Sarah Larbi runs an excellent meetup. I would recommend checking it out esp. to connect with local investors.