What are some things to consider when buying a condo?

buying a condo

Is buying a condo a good investment?

The recent news about Kitchener’s newest condo (and tallest building) and a conversation I had with an old client last week, got me seriously thinking about condos again. Here’s the thing. I don’t think buying a condo is a good investment if you can afford to buy a house. Here’s the pecking order: Single family home, freehold townhouse, condo townhouse then condo apartment. (Semi-detached is the same as freehold townhouse).

But I think buying a condo is a great idea if your other choice is to rent. Getting into the market and starting to build equity should be undertaken as soon as possible, as soon as it make sense for you to do that. If you think you are going to be around for three or more years, then buying a condo apartment should be strongly considered. 

My first home, for the record was a three bedroom condo on the 15th floor of a 15-floor condo building. Buying property is a good long-range investment, no matter what it is. 

What are some things to consider when buying a condo?

What are the advantages and disadvantages of buying a pre-construction condo?

Advantages

One of the best advantages of buying a pre-construction condominium vs a resale condominium is that you often have more choice of floor and floor plan. Some people like to live high up where the air is fresh and clean (like me). Some will not live above where the fire ladders will reach. Some people like to have the sun streaming into their windows in the morning. Others like to watch the sunset. Either way, buying new often offer more choice of where to buy within a building.

Another advantage of buying pre-construction is that you will often have some choice of appliances, cabinetry and flooring. 

Finally, the other advantages are monetary. 

  1. When buying a pre-construction condo you will have time to save as the building is built. You will be required to put down some initial payments but the bulk of the money will be due upon occupancy.
  2. Condo fees for a new building are always lower than for a building that is twenty years old or older. 
  3. It used to be the case that pre-construction buyers got a deep discount compared to buyers who bought when the building was complete. I’m not certain that is always the case anymore.

Disadvantages

Of course, there are some disadvantages to purchasing a pre-construction condo unit.

Some people have a hard time with floor plans. It is hard to imagine what the finished product will actually look like. You also will not be able to touch and see and smell the building, the elevator, the hallways…It is like buying a jacket off of Amazon. 

Recently, I was with a client looking at a pre-construction condominium apartment. The salesperson openly and directly said that the builder had no chance, no intention of meeting the July 2019 closing date and my client would be best to plan for December. Delays happen and they are built into pre-construction planning.

The other thing that many pre-construction buyers have a hard time with is the occupancy period. Many people have a hard time essentially “paying rent” to the builder after they move in but wait till the building is finished and the condo board is formed. This can take three months to over a year. During this period, not only can you not start paying your mortgage, you usually cannot sell the unit (unless you have an assignment clause). 

Finally, there are fees that will need to be paid upon closing of a pre-construction home that are not part of a resale home. Things like HST and development levies are often a surprise to pre-construction buyers.

What are the advantages and disadvantages of buying a resale condo?

Buying a resale condo is similar to buying a resale home. As opposed to a pre-construction, you can see exactly what you are buying. You do not have to wait for the damn thing to be built and then through the occupancy period and there are more knowns and fewer unknowns (like, if you are an investor what sort of rent the unit generates, the utility costs and the condo fees…)

The disadvantages of buying a resale condo might include higher condo fees, the need to renovate and update. In this market, you may get involved in a bidding war when trying to buy the unit…things like that.  

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