Are Condominiums Good Investments? The Three Cardinal Rules

Are Condominiums Good Investments? The Three Cardinal Rules


By Shane on Feb 09, 2011 in Condos & Builders, First Time Home Buyers, Toronto Builders, Toronto Condos

It depends. If you have a good head on your shoulder and not into gambling, they are. The risk in condominium investing always increases as your investment horizons shorten. Plan to hold your condo for at least 5 years, but preferably 10.

So can you make money? Yes, but it comes down to research. Really, it isn’t rocket science. It all comes down to cash flow. It is critical that you have a plan, one that includes the three cardinal rules of condo-investing:

1- Make sure you are getting at least 10% return on your investment. If you are not, there are more profitable real estate investment products to consider. Inflation-adjusted prices have consistently grown over the last 15 years in Canada, but not the US. Perhaps this suggests Canada enjoys a more robust real estate market? Price appreciation is of course a bonus and the speculative part; the rental income generated is the meat and potatoes of investing.


2- Make sure the down-payment is no less than 10%. You need to have flexibility. There will be maintenance fee increases and there will be special assessment bills that will put a dent in your budget. You will need to maintain a positive cash flow. Isn’t inadequate cash flow one of the primary reasons small businesses go bankrupt?


3- Location, location, location.