Buying an Older Condo In Toronto: Is it a Good Investment?
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Harbour Square. built around 1980. Photo courtesy downtownphotos.ca
I just got an email from a National Post writer who is writing a story about older condos and especially the trend of buying and older condo and renovating it to today’s standards. Below is an email that I sent to the writer. I have no idea if some or any of this will be published in the article but as I was writing it I realized it would make for a pretty good blog post, especially for the buyers out there who are thinking about buying a unit at an older (15 years or more) building. It’s somewhat scattered as it was an email but take a look and let me know what you think.
Buying an Older Condo in Toronto: Background
I have been working with a young couple,they are first time buyers. They have been priced out of the housing market in Toronto as it is basically impossible now to find a move-in ready house for less than $400K in a decent neighbourhood. They have turned to condos and are focusing on the west end around high park, junction, roncesvalles, lake shore area. This week we were in a bidding war for a renovated condo that was in a 40-year old building. This building has 8′ ceilings (standard for new buildings is usually 9′), no central heating/air conditioning systems, originally no ensuite laundry in the suites, no granite countertops or stainless steel appliances, the lobby and amenities areas are all original (think: Grandma’s apartment building), and YET, the unit received 6 offers! Similar listings in nearby old buildings have been sitting on the market for weeks with no offers. Why did this happen? several factors:
- Unit was renovatedwith beautiful and on-trend hardwood floors throughout. kitchen/living/dining was made open concept. hardware in kitchen and bathrooms were updated. appliances were nothing amazing but they were only a few years old.
- Hallways and elevators in the building had been very recently renovated making it feel like a building from 2012 when you are walking down the halls. lobby is scheduled for renovation this year to match.
- SIZE. older units offer such tremendous size and such amazing value on a price per square foot basis that many buyers who are not into the shoe-box cookie cutter condos that are being built today are turning towards these older buildings, especially the renovated suites in them as a great alternative.
Buying an Older Condo in Toronto: Some Numbers
Most units in this complex were selling last year for around $280K. This unit was priced at $320K and sold for $356K!
-average price per square foot for newly built (less than 2 year old) condos is about $550 right now in the city
-average price per square foot for a renovated old condo (more than 20 years old) will vary widely but in this particular area they can be had for around $300 per square foot in some cases!
Buying an Older Condo in Toronto:Tips and Advice for Buyers
- When buying a renovated suite, it is fairly common knowledge amongst Realtors that you should include a clause in the contract that says that the seller warrants all renos were done with the consent of the condo board, BUT what most people don’t realize is that if renovations are not also done with PERMITS, the buyer opens themselves up to the risk that the city could come in at some point in the future and make you ‘undo’ all those renos if they are not done to proper code. Although extremely rare, it is something to consider. Get advice from a lawyer and understand that this may not be covered by title insurance.
- Understand that older buildings tend to have lower appreciation rates than newer buildings. condos are commodities at the end of the day (unlike houses) and when a building passes it’s best before date, even a complete gut-job of a reno with high-end materials will only get you so much back and will not change the fact that the building is old. buildings less than 5 years old have been appreciating at around 8-10%. old buildings I find tend to appreciate at around half that rate. another factor for this is because maintenance fees in old buildings tend to be much higher than new. once they pass about $500/month for a 1 bedroom or $600/month for a 2 bedroom I find that buyer interest in that condo drops off dramatically thus reducing it’s value.
- From a strictly financial perspective I’ve found that it can be worthwhile to buy an old suite and renovate it but in most cases you will not get rich flipping condos. There is a ceiling. Most of the time in my experience you would be better off (from a financial perspective) buying new, doing nothing to it and selling before the building is 10 years old. still there is more to real estate than just numbers. People buy for many reasons and with the older buildings it’s usually about the SIZE.
- The sweet spot in this market is finding an older building in a solid location that has low maintenance fees. these older buildings can out perform some of the newer ones occasionally. A good example would 77/99 harbour square which is probably the best located condo on the entire waterfront and fees are relatively in check. appreciation rates have kept up with newer buildings nearby like the Waterclub-8york, 208 and 218 queen quay. Renovated suites there always draw a lot of interest and anything facing the lake has bidding war potential.