Condominiums in the GTA have long been considered a wise investment, and for good reason. Our city’s condo market can offer high returns and steady longterm appreciation. The bad news is, selecting the wrong opportunity could limit your financial success. Fortunately, there are ways of identifying (and weeding out) units that aren’t in the best overall condition—or financial health.
Here are five signs that the condo you’re thinking of buying might not be such a great investment…
1) An incomplete status certificate
Before you commit to purchasing a unit, you should request the status certificate for review. This critical document will tell you everything you need to know about the condo you’re thinking of buying—from the building’s rules and bylaws, to the amount of money in its reserve fund and other pertinent financial information. If any of the components of your certificate are missing or out of date, it could be a sign that the condo board that assembled it isn’t running smoothly.
2) Signs of poor financial health
When you’re assessing the investment potential of a unit, understanding the financial health of the building that houses it is crucial. While there are a number of indicators to consider, the reserve fund (which condo owners contribute to through their maintenance fees) is one that shouldn’t be overlooked. This sum is set aside for major, unexpected building repairs—and if it’s depleted, it could signal future financial trouble. Condo boards are required to commission a reserve fund study (which will lay out how much money the account should contain) every three years. The most recent version should be available in a unit’s status certificate.
Do you have a condo or house that you’re thinking of selling? The following resources will get you off to a great start:
- What Buyers Want in Toronto Right Now
- Should You Hold on to Your Condo or Sell It?
- What Is a Real Estate Exclusive?
3) Neglected common areas
When you’re touring a possible investment unit, take a close look at the building’s common areas. You may have a difficult time renting out a condo if the lobby, hallways, elevators, and other shared spaces are looking worse for wear. The same is true when it comes to amenities—if they’re poorly maintained (or you learn that they’ve been under construction for a long period of time), it could be a bad sign. A pool, exercise room, or rooftop terrace may be a big draw for many potential tenants, but only if they’ll be able to enjoy using them.
4) Pending legal action
If there’s any pending litigation against a building, you’ll discover it in the status certificate. A lawsuit may wind up leading to higher monthly maintenance fees, since there’s the potential for the condo corporation to be found responsible for damages—or incur legal costs. Having said that, not all litigation is cause for concern. Your legal representative can help you review the facts associated with a given purchase and assess the risk involved.
5) Security issues
Last but certainly not least: if a building doesn’t feel safe and secure, it’s usually a red flag. When you’re touring a property, make sure that all doors close easily and that there are no broken locks. As an investor, you should carefully consider the message that security issues send to potential future tenants. Concierge service, security cameras, and fob entry for units and common areas may all be selling points for qualified renters.
An informed condo investment can lead to significant returns, and part of making a smart purchase is knowing what to avoid. By performing your due diligence—which includes discussing your purchase with the right financial, legal, and real estate professionals—you can ensure that you make the smartest purchase possible!
Ready to buy your first investment condo? Reach out to start the process, and we’ll take the first step together!