Is Yonge and Eglinton a good area to invest in a condo?

Maria is a real estate investor who has bought several houses but never any condos. She is wondering if Yonge and Eglinton is a good area to invest. Also, when is the right time to buy a condo – resale or pre-construction? Finally, what are my thoughts on the condo building known as 1 King West?

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TRANSCRIPT 

Andrew la Fleur: Welcome to the Ask Andrew Podcast, real questions from real condo investors. You ask, I answer.

Hi, welcome back to the show. Thanks for checking out the Ask Andrew Podcast once again, and I’m your host, Andrew La Fleur and I’m answering your questions. Today we have Maria, and Maria is a seasoned real estate investor. She’s bought a lot of freehold properties, specifically in Barrie, Ontario, but she’s interested in the condo market as she lives in Toronto and it’s something she’s been thinking about for a while. So, she wanted to know what I thought about investing specifically at Yonge and Eglinton, and also we talked about timing, when is it right to buy a condo, at what point in time, resale condos versus pre construction condos, and more, so hope you enjoy this conversation with Maria. And once again, if you’d like to be a guest on this podcast, if you have questions that you want answered, then just go to askandrewpodcast.com. Click on “ask a question” and set up an appointment to chat with me. And I’m looking forward to it. Here is my conversation with Maria.

So, is Yonge and Eglinton a good place to invest? Generally speaking, yeah, absolutely. Do I know the market well? Definitely. I personally have invested in two units at Yonge and Eglinton. I have one which I just recently got possession of. Bought it a few years back at 155 Redpath, which is a newly completed building there, and I have another one right across the street coming up in about a year or maybe a year and a half at 150 Redpath.

Maria: Oh, yeah.

Andrew la Fleur: And I’ve sold a lot of units to my investors at various buildings in the area for sure. It’s one of my favorite areas, it’s a great part of the city, it’s only going to get better and better, especially as the LRTs coming in.

Maria: Exactly [inaudible 00:01:57]. I was looking at, reading a bit, there was a [inaudible 00:02:04] you had a bit of problems there. It used to be a parking lot, and some homes, and [inaudible 00:02:12] part of the excavation. And I know that after the [inaudible 00:02:17] ’cause sometimes you say, “okay, maybe show the plans” and so on, and then they have, a year into the building, they have another leave of sale. Is it correct?

Andrew la Fleur: A year, I’m not sure what you’re asking.

Maria: You’re saying it’s sold out

Andrew la Fleur: Oh right, yeah

Maria: I think, before even when I had my condo, sometimes a year into the construction they’re saying there’s a way that some condos been leased, you know? And I know that sometimes it happens that some people that put in the offer and then they want to come out of it, and they try to sell it.

Andrew la Fleur: Right

Maria: [inaudible 00:03:04] because I kind of like that [inaudible 00:03:07] the location is so perfect, you know? But anyway, I was just thinking, “well maybe I’ll ask [inaudible 00:03:17]” and of course they’re saying if it comes up, by all means, you know? But have you seen it in your…?

Andrew la Fleur: Yeah, I mean, that particular building, it is sold out. There may be opportunities to buy assignments from people who bought originally, or sometimes units come back if the purchasers go into default, if they don’t make their payments the units can sometimes be taken back for various reasons, but it’s pretty rare. I mean, you’re talking about buildings with hundreds of units, maybe five, ten, fifteen of them might come back at different times. But generally speaking it’s best to get into these projects if you’re buying as an investor at the very first launch stage. Getting in first is generally the best time to get in. Sometimes there are opportunities where it makes sense to get in later, depending on what incentives and programs or opportunities might come up, but as a rule of thumb, yeah, the idea is to get in at the very start of it.

I mean there’s in terms of- there will be other projects coming up in the area, certainly in- that I have my eyes on for later this year. There’s one coming up pretty soon right now called Uovo Condominiums, I don’t know if you’ve seen that one, that’s a very small building, 67 units, so that could potentially be an interesting one. A lot of larger suites in that building, a very exclusive feel with only 67 suites. So that’s an interesting one to watch. Citylights Phase 3, that’s one I would point out to you. Citylights Phase 1 and Phase 2 were sold out by Pemberton about a couple years now, Phase 3 I believe is gonna be coming up, should be this year from what I hear, that one will be one to keep your eyes on and ears on, as potentially a good investment there.

Maria: What’s you’re opinion on resale. There are some condos, there’s one that’s not very far from, again from the Uovo, on the same side, it was built by Allure, again it’s a boutique. There’s also somebody who brought to my attention that sometimes, twice this year actually, that there was a condo for sale. I know they were very well built, those condos as well, they’re so small and with the larger units.

Andrew la Fleur: Allure Condos by Greenpark. That’s a nice building, I sold in that building as well, at the very beginning pre construction stages. Resale is always an option of course, you can always buy resale, but when it comes to condominiums, I know you mentioned that you have other investment properties but you haven’t got into condos.

When it comes to condos, it’s always best to buy condos pre construction at the earliest possible stage. Condos are different from houses in that respect. I’ve got some videos and things I can send you that go into more detail about why this is, but essentially, condos are commodities which is a little bit different from houses, where everybody wants the newest condo. The newest condo is always the most in demand, is always the most desirable, so when you buy pre construction at the lowest possible price, when that building is finished, it’s brand new and it’s the most desirable from a rental and also from a resale perspective. So it’s going to appreciate at the highest rate those first couple of years, and over time as it becomes seen as sort of an old condominium, then it starts to lose its appeal, most of the time, not always but most of the time it will start to lose its appeal. Maintenance fees start to go up, and a few other reasons, but that’s why I always recommend if you’re investing in condos, go for brand new. Always go for brand new, always go for pre construction. Get in at the earliest possible stage when the prices are lowest.

The other thing when it comes to resale is it’s hard to get cash flow of course, because you’re paying today’s prices and today’s rents. It’s challenging ’cause when you’re buying pre construction, you’re just setting aside some money for deposits and waiting for it to be built, you allow for, in that period of time the rental rates increase, and by the time it’s completed, generally speaking, certainly over the last decade, you’re getting very good cash flow when you buy pre construction and you rent it out three, four years later when it’s done. But if you’re buying today’s price you’re buying from Allure Condos say, you’re paying $400,000 or let’s say $500,000. You’re buying it from somebody who paid $350,000, so they’re getting great cash flow and they’re enjoying the run as an investor, but you coming in and buying it from them at $500,000, you’re probably gonna be in negative cash flow. So again that’s some of the reasons why I always recommend you buy pre construction.

Maria: And one of the things that from my learning and your [inaudible 00:09:08] lessons, is the reserve fund. Always look at the reserve fund when you buy. But of course when you’re buying from construction sites there’s no reserve fund.

Andrew la Fleur: Well again, reserve fund is an issue with older condo buildings. You’re buying something brand new, you’re really not concerned at all about a reserve fund because the building is brand new. Again, another reason why investing in new condos is the preferred route. If you are buying into older buildings then yes, you do start to have to consider the stuff about the building, but most of us are not building engineers who can ascertain whether a building is gonna need- it’s hard to know that. But when you buy brand new, you insulate yourself from that sort of a risk that can be associated with buying in older buildings.

Maria: There’s quite a lot I’m inclined to go to look into something that’s a two-three year, fashion, but again, I didn’t want really too much of the high-rise. I know that I should not put my heart in that because it’s an investment, but I’d still like to buy something that I like. I bought a few homes in Barrie, and one of the coaches kept saying, “don’t take it too personal.” It’s something that I like, I did some rent to own, I did some straight [inaudible 00:10:44]. I still have pride of the house, I really like- it’s a beautiful home, you know that type of feeling?

Andrew la Fleur: Yeah I understand what you’re saying but that’s the classic debate and battle in your mind as an investor is, when I’m making, you’re making decisions on it, is it something that you like or is it something that’s a good investment? It’s easier with condominium pre construction ’cause you’re just looking up floor plans. When you’re buying resale houses in Barrie, these sorts of places, and you’re walking into them and you’re looking at the carpet, the bathroom, your brain starts think about different things and considering different things. It’s the same old story of putting on- I always say take off your “is this good for me, end user” hat, and put on your “investor” hat and think about it strictly as an investor and don’t worry about anything else and the decision-making becomes a lot easier.

Maria: One more question that I wanted to ask you, is have you heard about the One King Street. I worked for TD there, I used to work on that particular building and it was part- one of my training branches. They have those condos that they sell, what do you think of them?

Andrew la Fleur: You’re talking about One King West?

Maria: Yes. How [inaudible 00:12:17] those condos? I mean the price of [inaudible 00:12:19] is not very high. I was in wealth management and I had a [inaudible 00:12:26] was here, [inaudible 00:12:29] you’ve got a place, go to One King Street, we’ve got a condo, TD and all the banks had condos where they can lodge their [inaudible 00:12:40] [crosstalk 00:12:43]. Some of those condos are actually interesting, like good size, some of them are old that you go in as [inaudible 00:12:50] and then you revamp it and I think even the hotel can even rent for you if you don’t have any renters. What do you think of that? Do you know much about that?

Andrew la Fleur: That’s a building that investors- I get asked about every few months or so, over the last ten years because- You look at the prices in the building and you look at the location and it’s tempting to think, “wow this seems like a steal of a deal,” but there’s reasons for that. The prices in that building have never really been very high they’ve never caught up to market. It’s always struggled. It’s a weird building, it’s an unusual building, they have, like you said, they’ve got this hotel component, the suites- the floor plans are weird, the maintenance fees are high. You’ve got issues with taxes depending on what unit you’re buying and you might be paying commercial taxes instead of residential taxes. The floor plans as I said are really quite strange in a lot of them.

Location, no can argue the location’s amazing but it was a strange concept right from the start with the developer and still to this day, 20 years later, it’s- the location will always be triple A but everything else about it is kind of weird, and as an investor ultimately, you don’t want to be getting into assets like that that are going to be hard to sell. You want to always have something that’s easy to sell in the future and a building like that- the challenge is, there’s a reason why the prices are low. They got a lot of weird stuff going on and the units are hard to sell. My general advice, stay away from One King West.

Maria: I’ve looked there- I’ve inquired here and there, and not a lot of people- realtors, they’re not very familiar with that, and I went to see one of them because what one of the engineers- I want to come and see it, and yes you’re right it’s a little weird. Something odd about the hotel setup yes, it comes up because the prices are so real. But I also talk about- other colleagues saying, it never goes up [inaudible 00:15:30] as an investor.

Andrew la Fleur: Exactly. Good question though.

Maria: My thing is, if I wanna do something in the city because it’s future, it could be [inaudible 00:15:50] for me when I come back to Toronto because I have a lease where I’m staying, I wanted to invest, and I think it’s [inaudible 00:15:58] that if you [inaudible 00:15:59] and then I have time to [inaudible 00:16:04] from here there and everywhere, and the keys are given to me. So [inaudible 00:16:13] come back to you because I know I talked to Tom and Nick and my coach and of course they’re more into the housing and it’s either east or west that they do with the condos, and of course I was thrilled when [inaudible 00:16:32] were interviewing you ’cause I’ve seen some of- here and there I see your name and now that you’re interviewing I go, “this is it.”

Andrew la Fleur: Great, yeah Tom and Nick and those guys are great I love those guys, happy to partner with them and help you out and extend the great service that you’ve got from them as well, happy to do that for you. Yeah, great. Well it was great to connect with you and start this conversation, and I look forward to talking with you more and working together with you in the future here.

Maria: So if anything comes up I can go and ask you a question?

Andrew la Fleur: Yeah of course you can text me, email me any time. I’ll send you a separate email after this to confirm my contact information and make sure that also you’re receiving my weekly email updates on the condo market too. Great.

Maria: Thank you very much! And have a great day.

Andrew la Fleur: Okay, thanks Maria, bye.

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