Investing in real estate can be a great way to create an income but there are several different areas that you could choose to invest in. One of the most popular and profitable methods of real estate investment is to buy a condo, either preconstruction or already built, and either flip it or rent it out and collect rent as income.
Buying a condo is a great way to break into the real estate investing world for many reasons. A condo often requires a lower initial investment and therefore will be easier to afford, especially as a new investor.
Top advantages to investing in a condo
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1. Community and socialization
In a condo setting tenants and owners live in closer quarters than they would in a neighbourhood with stand alone houses. Because of this, they can develop a greater sense of community, especially if there are shared amenities like a pool or fitness center. This is often appealing to new tenants looking for a home to rent.
2. Condos are typically more affordable than single family homes
While this isn’t always the rule, buying a condo typically requires less of an overall investment than buying a townhouse or single-family home does. A lower purchase price translates into a lower out of pocket initial cost, making it easier to break into the market. Whether you’re just getting started in the world of real estate investment or you’re a seasoned pro, a condo will make a great addition to your investment portfolio.
3. Renting out condos has tax advantages
When buying a preconstruction condo, if you can prove that you have it rented out for the first 12 months you can submit your documents and get an HST break on your purchase. Also, any expenses related to the rental condo can be claimed against rental income. Finally, when you sell your rental condo at a higher price, you’ll be taxed on capital gains. Compared to having invested in something else bearing interest, capital gains tax rules dictated only half of that gain is eligible to be added as taxable income for the year (whereas interest earned is dollar for dollar).
4. Lower maintenance responsibilities and costs
The HOA fees and maintenance costs that come along with owning a condo translate into there being less day-to-day tasks to worry about. Things like garbage removal, roof maintenance, pool care, landscaping, water delivery, lawn care, snow removal and most outside repairs are all generally taken care of by the condo association. Even roof and window replacements are often covered by the condo fees that you pay each year. These are all costs that you would be solely responsible for in a single-family home.
5. The included amenities
Living in a condo often comes with access to amenities like a fitness room, a pool, sauna, hot tub or club room. These amenities are a great selling point when it comes to either renting out or reselling your condo.
6. Can buy preconstruction to customize and maximize your investment
When you buy a preconstruction condo you are able to choose key features that could make your unit easier to rent out when the time comes. Things like proximity to a stairwell or elevator, the view from the balcony, the finishes in the kitchen and the layout of the unit can all affect the desirability of your investment property. The sooner you buy into the condo, the more savings you’ll see as developers tend to offer larger incentives at the beginning of the buying process.
7. The homeowner association can make protecting your investment easy
Since the association and their fees often govern most shared aspects of a condo building, some of the stress of maintaining your unit and hoping renters help maintain your property value is removed.
The rules instilled by a condo association can affect things from whether you paint your front door to what kind of activities tenants are permitted to do on your balcony or in your unit. This helps ensure that your property value stays consistent since all tenants are held to the same standard. While this might feel restrictive as a new investor, these rules actually help protect you from the possibility that other owners or tenants could neglect or harm their property, in turn harming yours, too.
Get in the real estate market with a condo!
Getting “in” to the real estate market is the Canadian dream, and for good reason. There are not many wealthy Canadians that do not invest in real estate. Simply, it’s provided stable and growing returns over decades now. Building equity is your ticket to financial freedom in the long run, and the best time to start is “now” as there’s no way to time the market.