May 31, 2016 - No Comments!

HOUSE VS. CONDO – THE DIFFERENCE MIGHT BE BIGGER THAN YOU THINK

If you live in metro Vancouver, odds are you have been faced with this dilemma. I hear this question quite often, should I buy a house in the suburbs or a condo downtown?

With a booming real estate market and surging housing prices, “house” living near the core is near impossible for most. It is true, a condo is convenient, more affordable and if you are single or do not have children, buying a condo could just be the perfect solution! Right? .. well maybe not..

Firstly if you are looking for a return on your investment, condos traditionally do not appreciate nearly as much as houses do, if they appreciate at all. If the condo market is doing good, odds are the housing marking is doing amazing!

Secondly, condo living is often short term. Not to say that some people do not live in a condo long term, but majority do not.

Thirdly condominiums are a ‘complicated’ investment. A number of factors, often ignored, when investing in a condo can significantly impact your bottom line, the list is exhaustive, but some of these factors include the size of the reserve fund, whether the owners are getting along, whether management is doing a good job, sufficiency of bylaws, restrictions on use, etc.

When you are buying into a condo/strata, just remember, more often than not, you will have a very little say in how the building is run and managed. You can only hope and pray that all the owners are on the same page. Maybe the majority want to replace all the windows, this could cost you a significant special assessment that you might not otherwise wish to incur or maybe the owners vote to restrict the age of the owners/renters in the building, this would substantially affect (drop) the value of your condo, those are just a couple of scenarios you could face as a condo owner.

Bottom line is a lot could go wrong. Not to mention that although a building may be ‘new and modern’ when you buy it, it won’t take long for those amenities and the building to become dated. Upgrading your house is relatively easy, upgrading an entire apartment building or high rise and common areas, not so straight forward.

Don’t get me wrong, Condos can be a great investment, but I absolutely do not recommend it as a first investment and if you do make money on condo you can almost always be certain that you would have done a lot better on a house. So what is the solution? How can you have your cake and eat it too?..

Well, if you are sure you want to live in a condo, yet still want to take advantage of any potential increase in the housing market, consider buying a house and renting a Condo. With record low interest rates, you are likely to find a property that will produce enough rental income to cover your monthly obligations, maybe even earn you some surplus income. When the time comes, you could move into the rental property, or sell it, using the profits to purchase your dream home or another rental property.

Be prepared to stay in the market long term (up to 15 years), it may not take that long to see a decent profit, but in the meantime you shouldn’t have to worry too much provided you have sufficient rental income.

If you already own a condo or you are dead set on owning a condo, don’t panic, it does not mean you are going to lose your shorts or you need to sell now, but DO take some immediate steps to make sure your Condo investment has the best chance of profitability. At a minimum make sure you have a comprehensive condo insurance policy that protects you against special assessments, get involved with the strata and educate yourself as much as possible.

Stay tuned for my upcoming article on the do’s and dont’s of condo ownership.

Alex Khalil
Mortgage Specialist
Mortgage Evolution Yaletown
C. 604-367-7880 – F. 888-377-7510
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