Condo: A Better Long-Term Investment Option Compared to Detached Homes

When discussing cash flow, it’s essential to consider external cash flow sources. This includes funds coming from personal income, borrowing from family and friends, or obtaining a portion through refinancing. Refinancing is a crucial aspect that requires careful handling and attention to specific details.

In purchasing condos, the price fluctuations are not as significant, making them suitable for long-term holding. Many people think that condos are not ideal for long-term investment, but this is a misconception. When you consider property tax, maintenance fees, rental income, and mortgage interest together, condos generally provide better cash flow compared to detached houses. Detached houses have larger market fluctuations and are less suitable for long-term holding. While the potential for appreciation might be higher, the overall cash flow performance is not as favorable.

Refinancing is an important financial tool. When interest rates are low, such as 1.5%, it is beneficial to refinance as soon as possible to leverage the funds. Refinancing can provide funds for a down payment on the next property or serve as risk capital. Additionally, refinancing costs are relatively low compared to selling a property, which involves taxes and other transaction costs. It’s important to refinance proactively rather than waiting until you need funds.

Selling properties, especially when it involves “cutting losses,” requires careful planning. If the property has tenants, coordinating with them to ensure the property is in good condition when listed for sale can make it more competitive. It might be beneficial to temporarily relocate tenants to showcase the property better. Selling a property with tenants can be challenging as the property might not be presented in its best condition, reducing buyer interest.

When choosing property types, investors should make decisions based on their circumstances. Generally, detached houses have poorer cash flow and are more challenging to manage due to maintenance and tenant issues. Townhouses might be a better option as they often attract new immigrants and offer a balance between price and potential appreciation.

For condos, location is crucial. Properties close to work locations or subway stations have higher investment value. North York is a good example as it provides convenience and accessibility, making it attractive to renters. It’s also advisable to avoid areas with too much available land that can lead to oversupply.

Current market conditions suggest that new condos and houses might be in oversupply, especially with many new developments completing soon. However, looking ahead five to seven years, there might be a shortage, making it a good time to invest now while prices are lower. For instance, certain pre-construction projects in areas like Mississauga are currently priced attractively and could be worthwhile investments for the future.

Investors should also consider their career and income stability when planning investments. Diversifying income sources beyond real estate-related activities can mitigate risks associated with market downturns. For example, those who have shifted from stable jobs to real estate-related professions might face difficulties during market downturns when both their income and property values are affected simultaneously.

Finally, while it’s important to learn from successful investors, each person’s situation is unique. It’s essential to tailor investment strategies to one’s financial situation, risk tolerance, and long-term goals. This involves making informed decisions about property types and locations, refinancing options, and managing cash flow effectively to ensure long-term financial stability and growth.


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