Today, the prospect of purchasing a condo is increasingly becoming a consideration for many. Condos offer a number of appealing benefits, such as little to no property maintenance and usually a lower purchase cost when compared to other property types. However, purchasing a condo involves some processes unique to the property type that anyone interested should be aware of.
Presale or Resale?
Presale condominiums are units for sale in a building that have yet to be constructed. These types of transactions are common in cities like Toronto, where there are many active residential construction projects occurring at a given time. There are some benefits to choosing to buy a presale condo, such as:
Usually, a lower cost versus current market value.
A greater selection of locations within the building.
A broader range of options and upgrades for the unit.
A brand new, unlived-in property.
A warranty for your new condo unit.
There are also some cons for these types of transactions, such as:
You cannot see what you are buying, instead relying on artist renderings and floor plans.
You might move into your unit while construction continues in others, which may be disruptive.
Your deposit will be held up for the duration of the construction.
Construction may not be completed by the expected date.
Banks may be more hesitant in providing a mortgage for an unregistered condominium.
Resale condos have the benefits associated with other properties currently for sale on the market. There are a few attractive reasons to go with a presale condo, but you should be fully aware of what you are signing up for before you make the big decision.
Review the Status Certificate with Your Lawyer
You can think of condo status certificates as the equivalent of home inspections for detached houses. Status certificates are documents that must be generated by the condo building that communicate important details such as the balance of the building’s reserve fund, if there are any building-wide repairs, if there are any lawsuits against the building, etc. Essentially, anything that could affect the resident’s of the building will be truthfully stated here in detail. Part of your real estate lawyer’s job is to read through the building’s status certificate and notify you of any potential concerns. If you’re in need of a real estate lawyer to perform this service, reach out to us and we’d be more than happy to help!
Invest in the Building
Purchasing a condo is different from a detached house as you're essentially buying a relatively small piece of a building. As such, you should consider your potential purchase as an investment into the community and question whether it’s a place worthy of your investment. During your showing, make sure to check out communal areas such as outdoor spaces, pools, BBQ areas, fitness rooms, etc. One building might have much nicer amenities than another, which can be enough to sway your decision. The status certificate evaluation will help you understand less tangible parts of the building, notifying you of potential issues that will impact residents. It’s also advisable to do some searching online about the building’s reputation. The website condoessentials.com is a great resource for condo building reviews.
Rental Property Eligibility
Purchasing a condominium could potentially be your first step towards becoming a landlord! Condos make excellent rental property investments for an abundance of reasons, but notably due to their relatively low maintenance. Like other properties however, there are other factors to consider if you wish to one day turn the condo into a rental property. You should first consider what might attract potential tenants rather than what might best serve your own personal needs. For example, consider areas people would want to live rather than places people need to live. This means favouring locations near subway stations and other areas served by public transit. Choosing a unit that is unique, such as a loft, or something else that possesses something special about it is alluring to many prospective tenants. Conversely, smaller units seem to experience greater average growth potential than larger units. Over the last 10 years in Toronto, the studio - the smallest condo unit type without a bedroom - experienced the largest growth overall. However, studios are often rented to short-term tenants, as they usually move once they’re able to afford a bedroom. There are many more considerations required for rental properties, so it is best to do your own research to determine which asset is right for your investment strategy. See our blog post on 5 Common Mistakes Made by Rental Property Investors for other details to get you started.
Whether you are looking to purchase a condo for yourself or to rent it out to someone else, you’ll need a real estate lawyer to assist along the way. Doormat provides real estate legal services with enhanced clarity, efficiency, and support that will equip you with the best advice for a transaction.