3:28pm I return to my desk and see yet another update from the same group of condo buildings on the MLS. At this point these updates just don’t warrant any further click…
These units are what I affectionately call the ‘New Hype Old Fright Condos’
The Toronto Condo market has become an interesting entity. In Toronto people used to buy land, now people are purchasing air space., a box in the sky.
Everywhere you look there are new developments in the city. Some are a great place to live and others… well they can be “interesting” to say the least.
HERE IS SOME FOOD FOR THOUGHT:
- What do you want when you purchase a condo? A home or a potential rental unit?
- Do you want an owner occupied building or a tenanted building?
These are important things to consider before your next purchase.
I’ve noticed that there are tons of predominantly tenanted new developments.
Personally without proper investigation, buying in one of these buildings can be mistake…
Lets compare rental cars and apartment buildings to these tenanted condos. Rental cars are beaten, abused and always in for repair. Apartment buildings seem to always have damage. Moving causes destruction. Drywall holes, scrapes, scuffs, dated elevators etc.., These buildings are heavily used and abused.
Typically when someone purchases a big-ticket item, there is a sense of pride and ownership present, details matter. Looking at an older apartment building you just don’t see that. The majority of older condominiums however out of date they may be are still well maintained. Spotting the difference between an old condo versus an apartment building is evident during a tour.
I think you realize where I am trying to go with this.
Lets fast forward 5 years from now looking at the downtown core. The buildings that are new today and are heavily tenanted, what will they look like? What will the value be?
Lets look at 38 Dan Leckie Way. There has hardly been a day since June of 2010 where I have not seen an update, or a new listing pop up in this building. There have been over 200 properties for lease on the MLS since then and only 172 properties for sale. Considering that there are under 400 units in this building this is a bit alarming.
This shows that LESS THAN 10% OF PEOPLE PLANNED TO EVER LIVE IN THIS BUILDING WHEN THEY BOUGHT!
Dan Leckie like many other buildings has been purely a speculative investment. People purchased to either flip or rent. I have never seen a building have more units sitting on the market that are over priced and stagnant. (This includes some of our power of sale complexes that have reserve funds that show over 5 million in debt!)
There are some other buildings in the city’s core that are now 2 to 3 years old that have begun to show some financial weakness as the result of over-tenancy.
BY NO MEANS AM I STATING THAT PURCHASING A CONDO FOR AN INVESTMENT RENTAL INCOME IS A BAD IDEA, what I am trying to get across is its not always wise to purchase with the herd. Inquire about the buildings tenancy rate,
THIS is YOUR purchase don’t you want to know a little bit about the demographics in the building?
Touching back on my rental car comparison; it seems that Dan Leckie has become that vehicle. Will the financials of the building be able to accommodate the heavy tenancy rate?
Time and proper management will tell.
Remember, when you are shopping ask yourself:
Do you want to buy a used rental car or a quality pre-owned?