A condo is the typical purchase for most first time buyers. The price point is perfect and it accommodates their needs quite well. Most first time buyers will be looking to move up within 2-5 years and a question they often ask is “should I keep my condo as an investment property?”
I don’t know what it is but I notice that people assume that by simply having a piece of real estate in your portfolio means that you have an investment property and it is a good idea to hold onto it long term. What you actually have is an asset and whether or not it is a good investment is solely to be based upon the numbers. Simply put, if it does not make you a good return, it is not an investment property.
Condos are typically bad investment properties because as the landlord you are paying for the maintenance fees and because of the size of the unit and the fact it is a single family property, the amount of rent you are able to charge is likely just covering the bills.
While you might be banking on the notion “prices will keep increasing” that is a risky bet and an investment property should be providing you with positive cash flow every month. Take for instance this simple example:
- A $400,000 two bedroom condo in Mississauga will get you $1800-$2000 in monthly rent.
- A $400,000 legal triplex in Hamilton will get you $3500 in monthly rent.
Factor in that you are not paying maintenance fees on the home in Hamilton and it furthers the gains you can make from your equity.
Owning an investment property is one of the best ways for your portfolio to grow and create an excellent retirement portfolio BUT you need to make sure you actually have an investment property and not a black hole.
If you would like an assessment to see if it makes sense to keep your condo as an investment or look at what other options are available, we would be glad to help.