Condo expert Jai Wadhwani reveals six key things investors should research before purchasing a condo unit

Dec 16, 2009 – Buying a condo unit as an investment property can be tricky, but if you consider several key fundamentals, you are more likely to end up with a winner. As always, each of these areas should be carefully examined and the more information you can gather, the better.

1. LOCATION

With location comes all factors that define an area, including amenities that are close to the development. For example, investors should check out the local neighbourhood’s transit, retail stores and restaurants, entertainment centres and offices or places of employment. You will be able to sell or rent your unit based on a potential buyer’s and renter’s desire to be close to work or shopping facilities. You will then have an advantage over another property, which may be a safe location, but doesn’t offer anything extra or meet the specific needs of a client.

2. LAYOUT

The layout of a condo can allow you to increase the selling price between $20,000 and $50,000. You can do this by paying close attention to the details of a project. For example, if there is a one-bedroom plus den and the den is large enough to convert to another bedroom, this increases revenue because now your unit is in the two-bedroom price range. Before buying, always look for ways to make improvements on any given unit.

3. POTENTIAL PROFIT MARGIN

Look at several similar units and determine an average price per square foot. Once you have this figure, you can look at what the current market value is and compare it to nearby developments. If yours is higher or lower in value than others with the same projected occupancy dates, then you may want to compare such factors as what finishes or features are being offered in your project. This is also where your agents’ expertise comes in handy. For example, project one has granite counters and offers stainless-steel appliances with hardwood floors. Project two does not come with granite, has white appliances and carpet versus hardwood floors. Some buyers may pay between $8,000 and $10,000 more on the purchase price for project one. You may even be able to increase the rent based on a market that would pay extra for these features.

4. FUTURE DEVELOPMENTS

It is important to know about future developments like what residential and commercial buildings will be coming up near your investment. For example, if you are aware of a future condominium being built within proximity to your investment, find out what they may have to offer compared to your development. An agent will be an excellent tool as they may be in contact with certain builders in the area. Look at both advantages and disadvantages. This will help you determine what factors to point out to a potential buyer or renter and make your unit stand out amongst the masses.

You will also want to look at any upcoming commercial developments such as a grocery store or a coffee shop. These are great selling points to a potential buyer or renter and point to economic growth in any given area.

5. BUILDING AMENITIES

Being aware of what amenities your condominium offers over other buildings will help determine the price point. For example, you can look at a building with high-end amenities. While the amenities are excellent and better than any other building nearby, will your buyer or renter be willing to pay for it? There must be a price tag attached, either in the purchase price or in the maintenance. Some people, for example, may prefer location over amenities as they may not use the gym or pool. Find out what renters in the area prefer, as this will help you determine which development is the right one for you.

6. WHAT IF SCENERIO

If you’re buying off the plan, consider what will happen by the time the project is complete. What will happen to the market in two, four, 10 years? Make sure you look at all aspects and plan for the long term. What if you can’t sell the unit? Will you be able to afford to carry it and for how long? What will your carrying costs be and how will that compare to the rent you receive? What if the unit sits vacant; how long can you last if there is no one to rent it? Be sure to go over all factors to ensure that you can handle a condo as an investment property.

Jai Wadhwani is a sales representative at Royal Lepage Meadowtowne Realty in Mississauga, Ont. For more condo information, visit www.findmeacondo.ca.

From the October 2009 issue of CRE

source: http://www.canadianrealestatemagazine.ca/Features/39334/details.aspx

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