Filter by Categories
All Condos
Ask Andrew
Insights
New Condos by City
Ajax
Aurora
Barrie
Beamsville
Belleville
Bolton
Bowmanville
Bracebridge
Bradford
Brampton
Brantford
Burlington
Caledon
Calgary
Cambridge
Collingwood
Creemore
Dundalk
Georgetown
Halton Hills
Hamilton
Innisfil
Kawartha Lakes
Kingston
Kitchener
London
Markham
Thornhill
Milton
Mississauga
Cooksville
Mineola
Port Credit
Square One
Montreal
Napanee
Newmarket
Niagara Falls
Oakville
Oshawa
Ottawa
Peterborough
Pickering
Richmond Hill
Smithville
St. Catherines
Stayner
The Blue Mountains
Toronto
Amesbury
Baldwin Village
Bayview Village
Beaches
Bedford Park
Birchcliffe-Cliffside
Bloorcourt
Briar Hill
Brockton Village
Cabbagetown
Canary District
Casa Loma
Chinatown
Church & Carlton
Church & Wellesley
Church St. Corridor
Clanton Park
Corktown
Corso Italia
Danforth Village
Davenport
Davisville Village
Distillery District
Don Mills
Downsview
Downtown
East Junction
East York
Eglinton East
Eglinton West
Entertainment District
Eringate
Etobicoke
Fallingbrook
Fashion District
Financial District
Flemingdon Park
Forest Hill
Garden District
Greektown
Harbourfront
High Park
Hoggs Hollow
Junction Triangle
Kensington Market
King East
King West
Lansing
Leaside
Leslieville
Liberty Village
Little Italy
Little Portugal
Long Branch
Mimico
Moss Park
Mount Pleasant Village
Newtonbrook
Niagara
North York
Oakridge
Old Town
Ottawa
Parkdale
Regent Park
River District
Rosedale
Rustic
Scarborough
St. Clair West
St. James Town
St. Lawrence
Stockyards
Summerhill
Swansea
Tam O'Shanter-Sullivan
The Annex
The Junction
The Kingsway
The Queensway
Trinity Bellwoods
Victoria Park Village
Wallace Emerson
Waterfront
West Rouge
Weston
Willowdale
Yonge & Bloor
Yonge and College
Yonge and Dundas
Yonge and Eglinton
Yonge and Finch
Yonge and Lawrence
Yonge and Richmond
Yonge and Sheppard
Yonge and St. Clair
York Mills
Yorkdale
Yorkville
Uxbridge
Vaughan
Maple
Thornhill
Woodbridge
Waterloo
Welland
Whitby
Whitechurch-Stouffville
New Condos by Deposit
10% Before Occupancy
15% Before Occupany
20% Before Occupancy
5% Before Occupancy
New Condos by Developer
16th Avenue Development
Ace Development Ltd
Acorn Developments
Addington Developments
Adi Development Group
Allegra Homes
Alterra Developments
Altree Developments
Amacon
Amalfi Homes
Amexon Development
AMICO
Andrin Homes
Angil Development
Aoyuan International
Aragon Properties Ltd
Armour Heights Developments
Artlife Developments
Arya Corporation
Ashcroft Homes
Aspen Ridge Homes
Baif
Balder Corporation
Ballymore Homes
Bazis Inc
Benvenuto Group
Biddington Homes
Blackdoor Development Company
Block Developments
Bloomfield Homes
Branthaven Homes
Briarwood Development Group
Brixen Developments
Broccolini
Brookfield Residential
BSäR
Burnac
Cachet Homes
Caivan Communities
Camrost-Felcorp
Canderel Residential
Canlight Realty Corp
Capital Developments
Capital North Communities
Carlyle Communities
Carriage Gate Homes
Carttera Private Equities
Castlebridge Development Group
Castleridge Homes
Castleview Developments
CentreCourt
Centrestone Urban Developments Inc
Centreville Homes
Chestnut Hill Developments
Choice Properties REIT
Choo Communities
Cityscape Development Corporation
Cityzen
Claireville Holdings Limited
Cliffside Homes
Clifton Blake
Coletara Development
Collecdev
Concert Properties
Concord Adex
Condoman Developments Inc
Conservatory Group
Constantine Enterprises Inc.
Consulate Development Group
Context
Core Development Group
Cortel Group
CountryWide Homes
Craft Development
Creek Village Inc.
Cresford Developments
Crown Communities
Crystal Homes
CTN Developments
Curated Properties
Cystal Glen Homes
Daniels
Davpart
DBS Developments
DC&F Corp
Devron
Dez Capital
Diamante Development
Diamond Kilmer Developments
Diamondcorp
Dicenzo Homes
Distrikt Developments
Doornekamp Construction Ltd
Dormer Homes
Downing Street Group
Dream Unlimited Corp
Dundee Kilmer
DVLP Property Group
Eden Oak
Edenshaw
ELAD Canada
EllisDon Capital
Emblem Developments
Empire Communities
Evans Planning Inc
Evertrust Development
Evertrust Development Group Canada
Fengate
Fernbrook Homes
Fieldgate Urban
Fiera Real Estate
Fifth Avenue Homes
Firmland Development Corporation
First Avenue Properties
First Capital
Flato Developments
Forest Green Homes
Forest Hill Homes
FRAM + Slokker
Freed
G Group Developments
Gairloch
Gary Silverberg
Gemterra Developments Corporation
Genesis Homes
Georgian International
Geranium
Globizen Developments
Gordon Wells Ltd.
Granite Homes
Graywood
Great Gulf
Greatwise Developments
Greenfield Quality Builders
Greenland Group
Greenpark Group
Greenwin
Greybrook Realty
Guglietti Brothers
H&W Developments
Hans Group
Harhay Developments
Harlo Capital
Haven Developments
Hazelview Properties
Heathwood
Hi-Rise (West) Inc.
Homes by DeSantis
Hullmark
Hyde Park Homes
i2 Developments
Icon Homes
iKORE Developments Ltd
IN8 Developments
Investissement SM Immobilier
Ironwood Bay
JCF Capital
JD Development Group
KAD Development Group
Kaitlin Corporation
Kaleido Corporation
Kalovida Canada Inc
Kaneff Corporation
KBIJ Corporation
Kilmer Group
Kingdom Development
KingSett Capital
Knighstone Capital
Knightstone Capital
Kroonenberg Group
Kultura
La Pue International
Lakeview Development Holdings Inc
Lalu Canada
Lamb Developments
Lancaster Homes
Lanterra
Lash Group of Companies
Latch Developments
Laurier Homes
LCH Developments
Les Entreprises QMD
Liberty Development
Liberty Hamlet Inc
Lifestyle Custom Homes
Lifetime Developments
Limen
Lindvest
LJM Developments
Lormel Homes
Madison Group
Malibu Investments
Manorgate Homes
Mansouri Living
Marlin Spring Developments
Marydel Homes
Matrix Development Group
Mattamy Homes
Mayfair Homes
MDM Developments
Medallion Capital Group
Menkes
Metropia
Metroview
Minto
Mizrahi Developments
MOD Developments
Monde Development Group
Mutual Developments
Nahid Corp
Nascent Developments
National Homes
New Horizon Development Group
Newgard Development Group
Nexus
NOCO Development Company
Norstar Group of Companies
North American Development Group
North Drive
North Edge Properties
Northam Realty Advisors
Northrop Development
Nova Ridge Development Partners
NYX Capital
Old Stonehenge
ONE Properties
One Urban
Options Development
Originate Developments
Oxford Properties
Parallax Development Corporation
Patry Inc Developments
Pemberton Group
Phantom
Phelps Homes
Pinnacle International
Platinum Vista
Plaza
Plaza Partners
Podium Developments
Presidential Group
Primont Homes
Profile Developments Inc
ProWinko
Quadcam Development Group
QuadReal
Queensgate Homes
RAJACan Developments Inc.
ReBuilt Construction
Reids Heritage Homes
Republic Developments
Reserve
Residences at Bluffers Park
RioCan
Rise Developments
Riverking Developments
Rivermill Homes
Rogers Real Estate Development
Rosehaven Homes
Rosewater Developments
Rowntree Enterprises
Royalpark Homes
Royalton Homes
Sag Development Corp
Sage Development Corp
Sapphire Construction of Niagara
Saxon Developments
Scholar Properties Ltd
Sequoia Grove Homes
Seven Numbers Development
Sherwood Homes
Shiplake Properties Limited
Sierra Building Group
SilverCreek Communities
Sina Development Inc
Skale Developments
SkyHomes Corporation
Slate
SmartCentres
Solmar Development Group
Solotex Corporation
Spallacci Homes
St. Regis Homes
St. Thomas Developments
Stafford Homes
State Building Group
Sterling Group
Sundance Homes
Sunny Communities
Sunrise Gate Homes
Sutherland Developments
TAS
Tercot Communities
The Brown Group of Companies
The Goldman Group
The Gupta Group
The Hi-Rise Group
The Remington Group
The Rockport Group
The Rose Corporation
The Sher Corporation
Tiffany Park Homes
Times Group Corp
Townwood Homes
Treasure Hill
Tribute Communities
Tricar
Tricon Developments
Tridel
Trinity Development Group
Triumphant Group
Trolleybus Urban Development Inc
Trulife Developments
TVM Group
United Lands
UrbanCapital
Urbane Communities
Valery Homes
VANDYK
VanMar Developments
Venetian Development Group
Vermilion Developments
Vintage Park Homes
Wabash Heights Developments Inc
Westbank Corp
Westbank Corp. and Allied Properties
Westdale
Woodcastle Homes
WP Development Inc
York Trafalgar Homes
Yorkwood Homes
Zancor Homes
New Condos by Occupancy Year
2019
2020
2021
2022
2023
2024
2025
2026
TBA
News
Podcast
True Condos Approved
Uncategorized
Videos
Filter by content type
Taxonomy terms

Condo Investment: Is it Better To Buy On A Higher Floor or Lower Floor?

When investing in a pre-construction condo, a question that always comes up is:

“Is it better to buy on a lower floor, and pay a lower price, or to buy on a higher floor but pay a higher price?”

So let’s try to answer that classic, shall we?

 

Background

When selling a building in the pre-construction phase, every developer will have a base price for a particular unit then charge what is known as a “floor premium” as you go higher in the building for a particular unit.

Most floor premiums in most condos in Toronto are $1000 per floor for all units. Although sometimes you will see floor premiums of up to $2000/floor or more if the building is a low-rise building or if they are larger units or if they are units on the highest (penthouse levels) of a building.

TIP: Occasionally you will see a developer try this technique: floor premiums of “only” $500 per floor BUT invariably in those buildings the base price for the unit is higher than the neighbouring buildings nearby – in other words the average price of units end up being the same as the other buildings next door that are charging $1000/floor with a lower base price.

Custom Analysis by Urbanation

I am a subscriber to Urbanation. I pay thousands of dollars per year personally to get access to data on the Toronto condo market that I can’t get anywhere else.

Paying for data like this makes me a bit of an “odd duck” amongst my competition. Why do I pay money for numbers when 99.9% of all other Toronto Realtors would not pay for this information (Urbanation’s primary clients are developers and enterprise customers)? Because when it comes to condo investing, knowledge is power.

So much of the condo industry is driven by hype and marketing, but my clients rely on me to cut through the clutter and deliver the straight goods. Urbanation’s reports and analyses are one tool that helps me do that and my clients benefit tremendously from it.

So I asked my friend Shaun Hildebrand at Urbanation if he would help me run some analyses to answer this question of is it better as a pre-construction condo investor to buy HIGH or buy LOW?

The Findings

Shaun searched for a suitable building downtown that met the following general criteria:

-high rise with at least 30 storeys

-same floor plate all the way up the tower (so you can compare the same unit on the 10th floor as the 50th floor)

-the building had to have many transactions over the past year or so.

What Shaun quickly found was that there were no buildings that had enough resales to make this type of analysis useful or statistically significant.

But what he did find was that if you look at leases instead of resales, you could find some buildings that would provide you with enough transactions to tell a story.

He found that Burano (condo by Lanterra developments at 832 Bay Street, 50 storeys) had a large number of leases and here is a summary of the data:

High floor or low floor condo? Urbanation analysis of Burano condos

What the Data Says

The data we found provides an answer to the question of is higher or lower better, but in a round about way.

Instead of showing what you will be able to resell your unit for if you pay an extra $1000/floor for it, we were able to show how much more you will be able to rent your unit for if you buy on a higher floor.

So we showed the extra income but not the extra appreciation in price itself.

That said, I took a few insights from this data:

Insight #1: Higher Floors DO get Higher Rents

The numbers for Burano shows that as you go up in the building and pay more for the privilege, you will get higher rents. This is very important because some investors still believe that they will not get higher rents if they buy on a higher floor and they will use this as a reason to only ‘buy low’. So don’t buy low just because you think you will not get higher rents if you go higher.

 

Insight #2: Higher Is Better

The big question this answers is that when you are investing in a pre-construction condo, it is better to go higher. Think of it like this: for a median floor premium of $8.33/floor/month that works out to $100/year. An extra $100/year on a $1000 initial investment means you are getting a 10% cap rate which is very good.

If you can get a 10% cap rate on a condo investment, you should take that all day long!

Higher is better.

 

Insight #3: 3 Bedrooms get the Highest Floor Premium

This was really interesting to see that the largest floor premiums by far were for the 3 bedroom units. Landlords of 3 bedroom units saw an average increase of $54/month or $648/year for every floor up they went.

If buyers paid only a $1000 per floor, than that works out to an astonishing 64.8% cap rate!

I don’t think this is a universal rule but investors who bought the 3-bedroom units on high floors in this building are doing very well at Burano.

Why are renters willing to pay such high floor premiums for these 3-bedroom units? My theory is that if you are already shelling out $3000+ per month for rent, what’s another $200-300/month for an outstanding view? High end renters will pay big premiums for premium views.

 

Insight #4: Renters Will Pay a Premium for Premium Views

Check out the 1-bedroom units on this chart. The 445 sq ft unit faces south, the 491 faces north. Even though the average rental price for both units does not show much difference, the average floor premium for the south facing unit is about twice that of the north facing unit ($16 per floor vs. $8).

How I interpret this is that the highest floors of the south facing unit command such a HUGE premium over the lower floors that it brings the average rental premium per floor up. On the other hand, for the north facing units, renters will not pay as much of a premium to go up very high. The reason for this is that the views to the south on high floors are spectacular towards the lake and the CN Tower and a high floor view is a very whereas the views to the north don’t really improve much as you ascend the tower.

So if it comes down to paying a large floor premium for buying a north facing or south facing unit, you are better to go with the south facing unit (assuming the view facing south is highly preferred to the north view in the building you are considering).

What the Data Does Not Say

While these findings are interesting, they are only 1 data set from 1 building, and it’s only for rental rates.

So take this all with a grain of salt. I consider this strong anecdotal evidence to support buying on higher floors is better than on lower floors but it’s not an empirical study by any means.

Unfortunately the bigger question remains: what will buyers on the resale market pay for a higher floor vs. a lower floor? For example, if you buy on the 50th floor, and you pay a $40k premium to do so, will you get at least $40k more when you resell than if you bought on the 10th floor?

Another thing these calculations do not take into account are increased property taxes for going up higher in a building (purchase price is higher) or increased mortgage payments for going up higher.

Conclusion

I hope you found this information useful for your condo investments. Let me know what you think. And if you want more info like this sent directly to your inbox, make sure you become a True Condos subscriber.

Tags