QUOTE (afshinrein @ Oct 24 2010, 08:14 PM) Hi,
Anyone has any idea on why or why not to encourage buying a condo in GTA?
The only 2 reasons I am not in favour of condo investment in GTA are:
1) Condo fee is a wast of cash flew
2) Huge inventory of condo makes it harder to rent or to sell.
Any other thoughts?
Afshin
Speaking for Toronto, and not the GTA which is a large area and which I do not know details about condos in say Burlington, Mississauga etc., it is hard to buy a resale condo and immediately rent it out for positive cashflow.
Generally, I find it takes a few years for the condo to be in a position to flow cash. What we have done so far is buy a condo and live in it as our primary residence. We then save for the downpayment on our next place. We then buy and move into another condo and rent out the one we used to live in. Generally, by the time we save up and are ready to move (1 - 2 years), the condo we are leaving will flow cash immediately once we start renting it out.
I suppose you could also achieve a similar result by buying pre-construction, but I have not done this myself, and I know some feel strongly against this (I believe Don says this is speculating and not investing... but that is a different discussion altogether).
The condo fees certainly make it harder to flow cash because it is a significant expense on top of your mortgage payment. That being said, our condo fees cover all utilities, hydro, electricity etc. Really all you have is mortgage + condo fees + taxes.
My wife and I work downtown and work long hours. Condos are ideal for us right now because
1) they are close by and therefore easy to manage;
2) there is not a lot of maintenance generally because everything outside of the interior walls of the unit is the responsibility of the condo corp;
3) (generally) no unexpected MAJOR expenses (no new roof, no new furnace etc) - granted a special assessment is an unexpected major expense but if you do your due dilligence your condo building should have a good reserve fund and should be well managed.
The "huge inventory" argument has been out there for a while. True there are a lot of condos but the vacancy rate in Toronto is also very very low. There are also a lot of new people coming into the City every year. If you buy on a subway line or in another prime location you should be alright.
Do condos give you the greatest ROI, most likely not, but they fit into our system well in that they pay for themselves - or flow cash, they steadily appreciate, they are close by, they are easy and (generally) inexpensive to manage. Then again we have had the luxury of owning them all as principal residences for a year or two before we turn them into rentals (which allows rents to catch up).