Four Seasons Toronto Downtown Condos
Our Toronto Condos Blog shows many of the new projects underway in downtown Toronto. Even we wonder how many Condos can actually be absorbed even by a growing influx of immigration to Toronto.
Some new Toronto Downtown Condos are said to have up to 90 per cent of investor participation.
Read below what Toronto condo investors are banking on.
From The National Post G Marr
But what this boom has done for real estate is level the playing field with stocks. The S&P/TSX composite index total return over the past 13 years is actually about 135%, just below real estate’s 140% gain.
Go back to 1980, when the Canadian Real Estate Association first started tracking average price, and real estate’s 446% return, based on average sales price, also compares with the market. Much of today’s activity is in condominiums even though the costs of carrying such an investment have risen dramatically.
Investors are still banking on a rising market. Urbanation Inc. executive vice-president Ben Myers says the average condominium in Toronto – the biggest market of its kind in North America – sold for about $490 per square foot in the second quarter. Based on about 750 square feet, that’s $367,500.
Your carrying costs would include a mortgage and with 25% down and about a 2.4% interest rate, your monthly mortgage payments would be $1,222.67.
The average condo fee is 47¢ per square foot, so add another $350 per month, plus, say, another $300 per month for taxes.
The problem is those approximate $1,900 in costs, which don’t include heat and hydro, are more than rental revenue.
The average Toronto condominium rents for $2.18 per square foot, putting your condo income at just over $1,600 per month.
That gaps seems worth the risk because condominiums in Toronto have appreciated at an average rate of 7% to 8% over the past 15 years.
New Toronto Condominiums also have the added attraction of requiring minimum cash up front until they are registered.
It can take three years to build a Toronto condominium, so you can get away with putting as little as 20% down before you have to come up with the full amount.
The math is simple. You put $73,500 down on that condo and hope the value of the $367,500 Toronto condo jumps to $450,000 in three years, based on a 7% increase.
That’s an $82,500 return and, even if you take out $20,000 for transaction costs, you are left with $62,500 profit, or an 85% return on your money in three years.
It’s attractive to many. Financial planner Ted Rechtshaffen has a client with a net worth of $2-million who owns seven condominiums. “It is a strategy that has worked,” he says, adding the model could come tumbling down if interest rates rise. “If you strip it all down, it’s a highly leveraged strategy. If you are of the view that real estate only goes up, highly leveraged is a smart thing.”
Related:
Toronto Downtown Condos
Toronto Condos For Sale Financial District
