I see too many new constructions around GTA, and I was wondering if a good idea to invest in a house that the closing date will be in 2022 or 23, so downpayment can be paid gradually, also inflation rate will do its magic to reduce its price value compared to the market at that time. any comment?
I worked in construction for almost 20 years, mostly in the condos. There is a paper taped to the window in each unit, it's an upgrade colour chart with the name of every owner. From my experience I'd say about 75% of Toronto condos are owned by people with Asian or Indian names.
Condos can be good investments. Everything cashflows if you put a larger down payment like 50%. Some people park their money in condos, as canadian real estate is relatively safe, and we have a good banking system compared to other countries. So they buy a new condo and price goes up as its built. You get rent and some appreciation. So as a % return on your money, it's better than buying mutual funds or a g.i.c.
But if you put the minimum 20% then you cant cash flow, and the carrying costs will eat away at you day job pay cheque.
I look for cash flowing property.
Rent>mortgage+tax+ins+$200 is my rule.
It's a starting point, then you add in maintenance, vacancy, management
And my cash on cash yearly return has to be between 8-10%. Meaning if it costs me $56k to buy the house, then if it cashflows 400$/month I make $4800 a year after expenses witch is about 8%. The mortgage paydown and appreciation is an added bonus but I dont count on it, because even though its raising my net worth, I can use it to buy groceries.
This is the way I was taught and it's worked for me. There are lots of properties that fit the strategy, you just have to find them. Or in my case, I make the house work by renovating it into 2 apartments
I worked in a sales center today at leslie and Shepard. There are 15 new buildings going there. I asked the lady for a price list. The smallest apt is 385sqft for 420k. Now I dont know what you could rent that for, but off the top of my head, I know that with a 20% deposit, that property wont cash flow, and I can find way better investments with my 20% deposit money.
If you are ok with paying out of pocket every month, and speculating that the market will continue to go up 15 to 20% a year, thenit's perfect. You may even be able to buy 2 of them.
Depends on the price. Untitled is asking $400k for 300sqft studio..
Even Bread Condos in prime location but they are asking $1300-1400 a sqft and having a hard time to sell out..
I am also seeing $2000 a sqft..
prices are getting really stupid
To me it has to make some sense for the potential rental income to cover your expenses and not speculation on appreciation
I worked in a sales center today at leslie and Shepard. There are 15 new buildings going there. I asked the lady for a price list. The smallest apt is 385sqft for 420k. Now I dont know what you could rent that for, but off the top of my head, I know that with a 20% deposit, that property wont cash flow, and I can find way better investments with my 20% deposit money.
If you are ok with paying out of pocket every month, and speculating that the market will continue to go up 15 to 20% a year, thenit's perfect. You may even be able to buy 2 of them.
You are right about not able to cacheflow with 20% downpayment, and that apply to all homes in GTA that are in fair conditions.
Can you elaborate more on these alternative investments ?
Depends on the price. Untitled is asking $400k for 300sqft studio..
Even Bread Condos in prime location but they are asking $1300-1400 a sqft and having a hard time to sell out..
I am also seeing $2000 a sqft..
prices are getting really stupid
To me it has to make some sense for the potential rental income to cover your expenses and not speculation on appreciation
I heard around 20% of new Toronto condoes are bought buy investment firms , so not sure who is the crazy the people who are buying them or the ones or are not.
I worked in construction for almost 20 years, mostly in the condos. There is a paper taped to the window in each unit, it's an upgrade colour chart with the name of every owner. From my experience I'd say about 75% of Toronto condos are owned by people with Asian or Indian names.
Condos can be good investments. Everything cashflows if you put a larger down payment like 50%. Some people park their money in condos, as canadian real estate is relatively safe, and we have a good banking system compared to other countries. So they buy a new condo and price goes up as its built. You get rent and some appreciation. So as a % return on your money, it's better than buying mutual funds or a g.i.c.
But if you put the minimum 20% then you cant cash flow, and the carrying costs will eat away at you day job pay cheque.
I look for cash flowing property.
Rent>mortgage+tax+ins+$200 is my rule.
It's a starting point, then you add in maintenance, vacancy, management
And my cash on cash yearly return has to be between 8-10%. Meaning if it costs me $56k to buy the house, then if it cashflows 400$/month I make $4800 a year after expenses witch is about 8%. The mortgage paydown and appreciation is an added bonus but I dont count on it, because even though its raising my net worth, I can use it to buy groceries.
This is the way I was taught and it's worked for me. There are lots of properties that fit the strategy, you just have to find them. Or in my case, I make the house work by renovating it into 2 apartments
Responding to hai loc. I recently worked on a sales center at hwy 7 and warden and they were charging $1000/sqft. And at avenue rd and Lawrence I did that sales center, and that builder wants 1800/sqft.
I'm a numbers guy. If it costs me $100k for a 20% downpayment on a 450k apt I need it to cashflows buy 8000 a year. That's not likely going to happen. There are so many better ways to invest my 100k$ than that. I could buy hockey or basketball tickets and sell them for more than an 8k$ profit. Just as a ridiculous example.
Depends on the price. Untitled is asking $400k for 300sqft studio..
Even Bread Condos in prime location but they are asking $1300-1400 a sqft and having a hard time to sell out..
I am also seeing $2000 a sqft..
prices are getting really stupid
To me it has to make some sense for the potential rental income to cover your expenses and not speculation on appreciation
I heard around 20% of new Toronto condoes are bought buy investment firms , so not sure who is the crazy the people who are buying them or the ones or are not.
Exactly what David said they are owned by Asian and Indian names local and foreign not necessarily firms but wealthy individuals. However people are not familiar with the condo assignment market which is a preferred exit strategy for most investors. I am apart of a few groups and these condos trade daily via assigning..
This is not my cup of tea as I am a passive buy and hold guy. I hum and ha all the time as the Toronto Condo market shot up 70% in 3.5 years.. I look at investments that are scalable and not speculative
IMO speculating on Toronto's condo market TODAY is a bit trickier than let's say 2-3 years ago. If you're a buy and hold guy, then buy a decent condo by a well-known developer at a AAA location and you'll be fine. However, especially for assignments, I would discourage you to make any moves as the condo market 1- has had an incredible run which in a lot of people's opinion is not backed by any fundamentals and 2- the amount of supply that's going to be available in 2022-2024 is incredible and WILL have a downward pressure on rents/valuation. Long story short, if you can and are willing to hold 7-10 years it's fine otherwise buy the next asset class (townhouse or a semi).
IMO speculating on Toronto's condo market TODAY is a bit trickier than let's say 2-3 years ago. If you're a buy and hold guy, then buy a decent condo by a well-known developer at a AAA location and you'll be fine. However, especially for assignments, I would discourage you to make any moves as the condo market 1- has had an incredible run which in a lot of people's opinion is not backed by any fundamentals and 2- the amount of supply that's going to be available in 2022-2024 is incredible and WILL have a downward pressure on rents/valuation. Long story short, if you can and are willing to hold 7-10 years it's fine otherwise buy the next asset class (townhouse or a semi).
Even buying a townhouse or semi.. breaking even on cash flow statement is a pipe dream
@Hai Loc, I agree, you almost cannot have a cashflow strategy here in Toronto. I would, however, love to explore areas within the GTA that could have that strategy applied to it.
IMO speculating on Toronto's condo market TODAY is a bit trickier than let's say 2-3 years ago. If you're a buy and hold guy, then buy a decent condo by a well-known developer at a AAA location and you'll be fine. However, especially for assignments, I would discourage you to make any moves as the condo market 1- has had an incredible run which in a lot of people's opinion is not backed by any fundamentals and 2- the amount of supply that's going to be available in 2022-2024 is incredible and WILL have a downward pressure on rents/valuation. Long story short, if you can and are willing to hold 7-10 years it's fine otherwise buy the next asset class (townhouse or a semi).
Even buying a townhouse or semi.. breaking even on cash flow statement is a pipe dream
I agree, however that is not preventing people from buying houses, many of them are not really investor, instead family with extra saving trying to put that cache somewhere, they don't do calculations or anything else, they go with simple rule, buy, rent and hold, however that seems to be good strategy in GTA in the last 7 years, which home prices going up relatively faster than other places, I was laughing on guy who bought condo for 250K 4 years ago, now it worth 450K. Now assuming he can rent it again, he can easily achieve 1% rule, with rents hitting more than 2K per month.
The same thing applies for other types, anyone who bought a house before 2015, I assume they are now doing 1% rule, assuming they are renting their house with today's rent.
IMO speculating on Toronto's condo market TODAY is a bit trickier than let's say 2-3 years ago. If you're a buy and hold guy, then buy a decent condo by a well-known developer at a AAA location and you'll be fine. However, especially for assignments, I would discourage you to make any moves as the condo market 1- has had an incredible run which in a lot of people's opinion is not backed by any fundamentals and 2- the amount of supply that's going to be available in 2022-2024 is incredible and WILL have a downward pressure on rents/valuation. Long story short, if you can and are willing to hold 7-10 years it's fine otherwise buy the next asset class (townhouse or a semi).
Even buying a townhouse or semi.. breaking even on cash flow statement is a pipe dream
I agree, however that is not preventing people from buying houses, many of them are not really investor, instead family with extra saving trying to put that cache somewhere, they don't do calculations or anything else, they go with simple rule, buy, rent and hold, however that seems to be good strategy in GTA in the last 7 years, which home prices going up relatively faster than other places, I was laughing on guy who bought condo for 250K 4 years ago, now it worth 450K. Now assuming he can rent it again, he can easily achieve 1% rule, with rents hitting more than 2K per month.
The same thing applies for other types, anyone who bought a house before 2015, I assume they are now doing 1% rule, assuming they are renting their house with today's rent.
I 100000% agree with you.. most of the people who invest in Toronto are high earners obviously.. I know a lot of them.. they dont think about the 1% rule they have been spoiled for the last 10 years on an appreciating Toronto market.. negative cash flow is fine with them.. their decision is based on location and can they allocated a portion of their high income to supplement their out of pocket expenses..
Most of them are not so analytical on cash flow analysis like we are