What Upgrades Should You Do When Buying a Condo for Investment?

what-upgrades-should-you-do-when-buying-a-condo-for-investment

In this episode, Andrew la Fleur answers a common question that many first time investors have about upgrades. Specifically, what upgrades should you do to a condo when buying for investment? His answer may surprise you.

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Andrew:	What upgrades should you do when you’re buying a condo for investment? Well, we’ll answer that question on today’s episode.
Speaker 2:	(music starts) Welcome to the True Condo’s Podcast with Andrew la Fleur. The place to get the truth on the Toronto condo market and condo investing in Toronto. (music ends)
Andrew:	Hi and welcome back to the show. As I said in the intro, on today’s episode we’re going to be tackling a question that I get asked quite often. That is what upgrades should you do when you’re buying a condo for investment. Well the answer might come as a surprise to you, but my answer to that question is pretty much always the same. That is none. That’s right. You shouldn’t do any upgrades to your condo, if you are buying the condo for investment, in most cases.
	Why is that the case? Well, this is, again, something that goes to your mindset when you’re purchasing a condo for investment. This is something that takes time to master and it takes … It’s a different way of thinking for new condo investors, but once you’ve done it a couple of times, it sort of becomes second nature.
	Basically what you want to do, I always say, is put on your investor hat. Take off your end user or buying to live in hat that most people, by default, will have as they’re looking at buying a condo. For yourself or for investment is just the mentality that you have as you’re thinking about what do I like or what would I live in or what do I want or what’s good for me. You’ve got to take that hat off and you’ve got to put on your investor hat.
	You have to think like an investor and not like someone who is buying for themselves because you’re not. You’re buying for investment and your only goal and your only thought should be around what is going to make me more money. What is going to maximize my return? What kinds of things are going to reduce my risk? What kind of things will make my unit rent out faster, so that there’s less chance of it being ever empty and sitting there and not paying me every single month? When it comes to reselling a unit, what is something that will … Are there things that will make my unit sell faster than a competing unit?
	When you’re thinking like that, when it comes to upgrades, things like fancy counter tops, high end appliances, upgraded flooring and tiles and things of that nature, usually 9 times out of 10, those sorts of things are not going to put anymore money in your pocket. The money that you’re putting into these upgrades, you’re not going to get that money back in the vast majority of situations. The reason for that is resale … when it comes to the resale market, when you’re going and reselling the condo in the future or when you, especially when you are renting out your unit to a tenant, the buyers and the tenants in the resale market are really not that sophisticated as a whole. They’re really not that picky. They’re really not looking too carefully at the type of stone that the counter top was used … was used for the counter top or the color of the hardwood vs. the other unit next door.
	Those kind of things are really not a major consideration for real buyers and real tenants, especially tenants, in the resale world, so once the building is completed. Your money in does not equal your money out, when it comes to upgrades in most cases. Also upgrades usually will cost you a lot more to do than through a builder, than it would to actually just do it yourself.
	Another reason to not bother with upgrades is a kitchen island, for example, the builder might charge you $8,000 for something that you could commission and build yourself with your own contractor after the fact for maybe 2 or $3,000. You could just go over to Ikea in many cases. Grab an island from Ikea for 5, $600 and it serves the same purpose. Better yet, let your tenants buy their own island from Ikea or wherever else they want if that is something that they are interested in having, which most of the time they’re not.
	Finally a reason why you really don’t need to bother with any upgrades in most cases is that the standards, the standard finishes in most condos, probably 90% of condos in Toronto right now are very, very good. In general the quality of finish is getting better and better every single year, as developers are finding new ways to get more and more out of their design budgets and as these materials and everything that is used in condos become more and more common. We’re just seeing every year that the game is generally stepped up, stepped up, stepped up. There’s really no need to upgrade most condos.
	With that being said, is there anything that I might sometimes consider breaking this rule. There’s a couple things. One, for sure, I always recommend as a, not really an upgrade, but more of an essential in my opinion, that is window coverings. You do want to set aside some money to have some window coverings in your unit. That is a big pet peeve of mine and of tenants as well. Just think about it. You move into a condo, brand new one especially and there’s no window coverings in that unit.
	That’s really the first thing that everyone living in a condo is going to need to find is window coverings. If you take care of that and set aside a few hundred dollars or a thousand dollars depending on the size of your unit and the type of window coverings you’re getting, that will go a long to making your tenants feel good and feel happy about being in the space and being in yours vs. some other unit that doesn’t have window coverings, that the landlord hasn’t gone through the trouble of spending a few hundred bucks to get that done. That’s something I always recommend doing. The window coverings that I generally will get in my units is just the basic, vertical blind, just a basic, white, vinyl vertical blind, simple, does the trick. You can open it right up. It’s visually not taking up much and it’s not offensive to anybody. Window coverings, definitely a good thing to have.
	Another thing you might consider occasionally, it’s pretty rare now, but it’s carpet. If the bedrooms for example, have carpet instead of the laminate or the engineered hardwood, you want to go ahead and extend that throughout the entire unit. It’s pretty rare nowadays. Pretty much every builder now will put laminate or engineered throughout the entire unit, including the bedrooms, but occasionally you might find a builder who cuts that out just to save some cost there, putting in some cheap carpet in the bedroom. Nobody likes carpet. Get rid of the carpet, definitely the way to go, very old fashioned. You want to get rid of that. Spend a little bit of money there to get rid of the carpet if you have that.
	Then a couple of maybes, lower down the list. One would be electrical or lighting. Some builders will cheap out on lighting, light fixtures. Usually it’s in the bedrooms and the bathrooms is where you see some issues. For example, no overhead lighting at all in the bedroom. Not standard, so you might have to spend a couple hundred bucks or a few hundred bucks for a fixture to be put into the bedroom. Bathrooms is the other big one where you might have a small vanity light fixture, but nothing in the shower. Another pet peeve of mine, you’re in the shower of the condo and you can’t see anything because it’s so dark, especially if you have a shower curtain. Little things like that to watch for. You might want to spend a few hundred bucks here and there for something like that.
	Finally, probably not because the builder costs are so expensive, but ceilings. You might want to consider putting in smooth ceilings if your condo comes with the stucco, the stippled ceilings. Again, more of a personal thing, pet peeve of mine, but buyers and tenants as well, nobody likes the stippled ceilings. If you can avoid that, if the cost is relatively decent to make it smooth ceilings, if it’s a couple thousand bucks or something for the whole unit, that’s money well spent, in my opinion. It’s not something you want to do after the fact. It’s very messy to do. If the cost is 8, $10,000 more or this kind of thing, don’t bother. That’s money that you’re never going to see back again.
	If you’re buying for investment and you’re wondering about what upgrades to make, there’s some tips for you today. I hope you found that useful and until next time, we’ll talk to you soon.
Speaker 2:	(music starts) Thanks for listening to the True Condo’s Podcast. Remember your positive reviews make a big difference to the show. To learn more about condo investing, become a True Condo subscriber by visiting TrueCondos.com. (music ends)