BY MARILYN WILSON, THE OTTAWA CITIZEN August 17, 2016
When buying a condo, it is important to consider what you goals are. Is this to be an investment property or will you live there?
In this space, we’ve talked extensively about how, as a buyer, you have to consider such things as whether your unit will be located near the garbage chute and how that might affect your living quality.
Investors may shop for different things than people intending to live in the condo.
For example, if you are going to live in the condo, you want to absolutely love it, so you might splurge on a custom kitchen or upgrade your bathroom. If you are going to invest and rent the condo out, you may take a less expensive unit with less extraordinary views.
This is because investors are more concerned with objective value than subjective value. They want to know that their buying costs will be recouped when they rent or resell. This is precisely the reason I always tells clients and readers to invest more in a condo only if you will be okay with not necessarily recouping your return.
The amount you customize to suit your own lifestyle should be limited if you intend to sell soon. Don’t sink tons of money into custom cabinetry only to find out it won’t necessarily increase your resale value.
Why? Because of what Realtors® call the Principle of Substitution. When your condo is on the market, people will consider whether they can purchase another similar condo for less. If they can, despite the fact that you have unique features, they may simply go for the other unit.
What I really want to talk about in this particular column is not the condo sales market, but the rental market. Investors in Ottawa primarily buy lower-priced condos, not only as they feel they could sell them more quickly, but also because they can rent them just low enough to cover their mortgage and condo fees.
This week, I helped a good friend rent a one-bedroom condo in Toronto. As condos are popping up so quickly in Toronto, you would think this would be a breeze; however, the rental market was so intense and fast-paced it was hard to believe. My friend put in an offer over ask on a one-bedroom that was on MLS for 24 hours – and was outbid! Can you believe it? Each unit we viewed had at least two other simultaneous showings. We would book six showings and the next day four were rented. This is not your Ottawa condo market, ladies and gentlemen.
We spent time with Heather Harris and Lauren Walker of Chestnut Park Real Estate Limited’s Harris and Walker Team and asked why the surge in the rental condo market? Harris said, “The problem with the lack of quality inventory in the freehold market has spilled over into Toronto’s condo market. Bidding wars are common in high demand buildings, not only for sales, but for leases as well. My advice is to keep a close eye on the neighbourhoods and buildings that appeal to you and if a suite comes available, be ready to act quickly.”
One of the buildings we visited had two units that were exactly the same layout and size, but one faced east and the other west. The east-facing unit had a darker colour scheme – darker hardwood flooring and darker cabinetry – and a gorgeous view of the CN Tower and Finance District. The catch is that the light coming into the main living spaces was limited. The other unit enjoyed lighter hardwood and cabinetry and western sunlight streamed through the windows. The view; however, was more generic.
Which would you pick? As the consumer, you would put your principle of substitution to good use here. Lauren Walker said: “The east-facing unit is the one you would buy and the west-facing unit is the one you would rent. Why? The east-facing unit had a spectacular view. The view is the one that a smart purchaser looks for if they plan on reselling at some point.”
Though the east-facing unit enjoyed spectacular views that made it feel quintessentially Toronto and would therefore make it a breeze to resell when the time came, the west-facing unit would be more enjoyable for a tenant and day-to-day living, as the sunshine streamed in. This is the perfect example of the different considerations that come with investing or buying to live in a condo building.
Before buying, use your condo sense and consider what your specifications are and your long-term motivations. By doing this, you will be able to maximize your enjoyment of condo.
Marilyn Wilson has been selling Ottawa real estate for more than 27 years and owns Marilyn Wilson Dream Properties Inc. Brokerage Christie’s International Real Estate. She can be reached through dreamproperties.com or follow her on Instagram @dreampropertiesrealestate
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