Is a Condo a Good Investment?

[mgronqui]

So I'm only in my 2nd month into my apartment lease and I feel like (well I am) throwing money away.

The money could be put to use into owning something and right now that is a condo. People say that the real estate market is on the downswing but it will eventually go back up. So isn't it better to buy now before it increases again?

Anyone who owns a condo or is thinking of purchasing one please share your experiences. I imagine I'll have to start paying property taxes and other fees?

[Psycho44]

yep you have to pay property taxes and maintenance fee which can run around $400 depending on the condo. They also usually increase the maintenance fee which is a real pain. Also depending on the condo, you might have to pay for gas, water, electricity which I pay for.

[pitz]

So I'm only in my 2nd month into my apartment lease and I feel like (well I am) throwing money away.



Why do you think that? You can either rent money, or you can rent a place to live. Either way, you are paying rent.

Real estate historically does not appreciate at a rate faster than inflation.

Figure out what is cheaper -- to rent the amount of money you would need to buy a condo (+ utilities + maintenance + taxes), or actually renting the appartment itself.


The money could be put to use into owning something and right now that is a condo. People say that the real estate market is on the downswing but it will eventually go back up. So isn't it better to buy now before it increases again?


It could easily take 10 years to see any growth in prices. In most areas, valuations are extremely stretched.



Anyone who owns a condo or is thinking of purchasing one please share your experiences. I imagine I'll have to start paying property taxes and other fees?

Property taxes, condo fees, utilities, real estate transaction fees, special condo assessments. If you don't have much of a downpayment, you will have to pay for mortgage insurance. Then you have to pay for the mortgage itself. If stuff inside your unit wears out or is broken, *you* have to pay to fix it as well.

There are good times to buy real estate and bad times...its really not a good time right now, especially since prices have grown dramatically faster than incomes.

[Psycho44]

totally unrelated but if you do go for a condo don't choose the condo unit that is indented a "v" shape into the condo building. Choose a condo unit that is flat spaced.

Why I say this because I'm stuck inhaling all the pot people smoke from outside that somehow filters up into my condo unit.

[mgronqui]

Why do you think that? You can either rent money, or you can rent a place to live. Either way, you are paying rent.


Yes but in a condo, eventually it will be yours. Then you can sell it and get money back or even a profit.

Say for whatever reason you decide not to finish paying off the condo. Is the total sum of the payments you made yours and you get that fraction of the cost of the condo when selling it? Also, I figure since prices will increase when the market is back up, it's better to buy now so that it's fixed in the contract how much mortgage you would pay. Or am I wrong on this?

Thanks everyone for your advice thus far.

[boyoflondon]

Why do you think that? You can either rent money, or you can rent a place to live. Either way, you are paying rent.

Real estate historically does not appreciate at a rate faster than inflation.

Figure out what is cheaper -- to rent the amount of money you would need to buy a condo (+ utilities + maintenance + taxes), or actually renting the appartment itself.



It could easily take 10 years to see any growth in prices. In most areas, valuations are extremely stretched.




Property taxes, condo fees, utilities, real estate transaction fees, special condo assessments. If you don't have much of a downpayment, you will have to pay for mortgage insurance. Then you have to pay for the mortgage itself. If stuff inside your unit wears out or is broken, *you* have to pay to fix it as well.

There are good times to buy real estate and bad times...its really not a good time right now, especially since prices have grown dramatically faster than incomes.



You are NOT paying rent "either way". On one hand, you are renting (throwing money away) while on the other hand you are "investing". Lets say, for arguments sake, after 5 years you decide to sell whatever you purchased. You will get something back as opposed to getting zilch from the renting option.

Owning is NOT for everyone. You must do your math inside and out, accounting for all the costs, given and unforeseen to see if you will be able to afford, carefully asses the market and THEN make the decision of whether or not it is a good idea to own.

[UrbanPoet]

#1 rule is... Location location location!

[PrinceMS]

Tip: It is recommended that you shouldn't plan to pay more than 1/3 of TAKE HOME income towards house mortgage!

My opinion: You have to decide, WHY are you buying the condo. Choices are either for 100% INVESTMENT or partial / no investment. If its pure investment then you are NOT living in it (doesnt seem like the case for you - so i won't elaborate MY OPINION on that).
If you are living in your own condo/house, (provided you can pay 25% down, and afford mortgage) you are making money on EQUITY. Eventually, you will own the place, and that gives you possibilities to do much more with your life (house mortgage is one of the biggest reasons, people unable to start new business, don't go on world tour etc).
if you are living in the house and the market becomes STABLE (because i doubt house price will really come down (again its my OPINION - no one knows the future)) you can outlive the constant market and make money in the long run.

BUT bottom line is that you should be able to afford it and have a cushion of funds available.

P.S: There are indications that mortgage rate will cut in Canada in decemeber (woohooo). If you are looking for a condo in Mississauga, let me know, might have a hookup for you. :)

[mgronqui]

Tip: It is recommended that you shouldn't plan to pay more than 1/3 of TAKE HOME income towards house mortgage!

My opinion: You have to decide, WHY are you buying the condo. Choices are either for 100% INVESTMENT or partial / no investment. If its pure investment then you are NOT living in it (doesnt seem like the case for you - so i won't elaborate MY OPINION on that).
If you are living in your own condo/house, (provided you can pay 25% down, and afford mortgage) you are making money on EQUITY. Eventually, you will own the place, and that gives you possibilities to do much more with your life (house mortgage is one of the biggest reasons, people unable to start new business, don't go on world tour etc).
if you are living in the house and the market becomes STABLE (because i doubt house price will really come down (again its my OPINION - no one knows the future)) you can outlive the constant market and make money in the long run.

BUT bottom line is that you should be able to afford it and have a cushion of funds available.

P.S: There are indications that mortgage rate will cut in Canada in decemeber (woohooo). If you are looking for a condo in Mississauga, let me know, might have a hookup for you. :)

That's some sound advice.

I doubt I could put 25% down as it would take probably 2-3 years to get that. My main goal is to get money invested in the long run as I'm throwing money away on rent. That's why I'm eager to rush into a condo. Or should I just be patient and wait until I can save at least 25%?

What are the average monthly payments of a condo anyway? If it's past 1500, then I'm definitely out of the ballpark. Might be better to stick with my $600 rent and start up a business.

I live in K/W but am open to hookups :razz:

[jerryhung]

That's some sound advice.

I doubt I could put 25% down as it would take probably 2-3 years to get that. My main goal is to get money invested in the long run as I'm throwing money away on rent. That's why I'm eager to rush into a condo. Or should I just be patient and wait until I can save at least 25%?

What are the average monthly payments of a condo anyway? If it's past 1500, then I'm definitely out of the ballpark. Might be better to stick with my $600 rent and start up a business.

I live in K/W but am open to hookups :razz:

IMO, knowing the KW, there isn't really a good condo to invest in
at least to my standards. It's still a house market (house/semi/townhouse)

However, do take my words and some other articles, KW will be the next growing area for the next 5-10 years, so yes, you should buy for that

[mgronqui]

IMO, knowing the KW, there isn't really a good condo to invest in
at least to my standards. It's still a house market (house/semi/townhouse)

However, do take my words and some other articles, KW will be the next growing area for the next 5-10 years, so yes, you should buy for that

Oh I know! The Research and Technology Park is growing and companies like Google are moving over. Soon, if not already, Waterloo will be overloaded with research companies.

[pitz]

Yes but in a condo, eventually it will be yours. Then you can sell it and get money back or even a profit.


If you make contributions to principal, over and above interest, sure. You can also contribute to an investment portfolio and build equity that way.


Say for whatever reason you decide not to finish paying off the condo. Is the total sum of the payments you made yours and you get that fraction of the cost of the condo when selling it?


No, you get the sale price of the condo, minus whatever you owe on it, minus any fees and taxes, back when selling it.

It is possible, in a declining real estate market, to not only make payments many years, but also to lose a portion of your downpayment.

Some people (in the US especially) bought houses that were so overvalued that they owe more on the loans for the houses, than the houses are actually worth. In order to 'sell' their house, they actually have to bring money to the closing.



Also, I figure since prices will increase when the market is back up, it's better to buy now so that


Eventually..prices will rise, but in the mean time, you will have a mortgage to service, and it could be a very long time before you see any appreciation.

If you bought at the height of the last Toronto bubble, in 1991, it took 10 years just for values to recover to the same levels.


it's fixed in the contract how much mortgage you would pay. Or am I wrong on this?


Sure, if you go with a long-term mortgage, and as long as you make the payments as prescribed, they can't take the condo away from you.

But you can lose money; for instance, if renting costs you $1000/month, and a mortgage is $1500/month (with utilities), and 10 years later, your condo hasn't gone up in value, then, effectively, you've lost $500/month that you might have been able to profitably invest elsewhere.

Obviously, its dangerous to give blanket advice, so I won't -- but you really should investigate your own local market, in particular, the relationship between rents, and prices, to determine whether it makes sense to buy, or if you are better off saving your money and renting.

[pitz]

What are the average monthly payments of a condo anyway? If it's past 1500, then I'm definitely out of the ballpark. Might be better to stick with my $600 rent and start up a business.


If you can rent for $600/month, a place that meets your standards, then, in terms of buying a condo, you'd have to find something on the market cheaper than $90,000. Otherwise, you'd be throwing your money away.

Good luck :).

[Bullseye]

Pitz - I don't know where you get the patience to keep spelling it out to the people who just don't get it.

[grant]

Unfortunately I think Pitz is wasting his time on this. You can't argue with dogma.

If people want to make poor financial decisions (i.e., buying when renting is cheaper) then why fight it? That leaves a bigger slice of the pie for the rest of us.

[pitz]

Unfortunately I think Pitz is wasting his time on this. You can't argue with dogma.


Last time I looked at houses in the K-W area, maybe a few months ago, the prices seemed fairly reasonable relative to incomes.

So its not a lost cause..... And the area is probably a hidden gem in Canada -- still affordable, decent jobs and economic drivers, and not a huge city either yet.

[PrinceMS]

That's some sound advice.

I doubt I could put 25% down as it would take probably 2-3 years to get that. My main goal is to get money invested in the long run as I'm throwing money away on rent. That's why I'm eager to rush into a condo. Or should I just be patient and wait until I can save at least 25%?

What are the average monthly payments of a condo anyway? If it's past 1500, then I'm definitely out of the ballpark. Might be better to stick with my $600 rent and start up a business.

I live in K/W but am open to hookups :razz:

I have heared from someone that minimum is 20% now, so change those figures to 20%. If you don't have 20% saved, then have patience.

If you can open a business - its a better decision in my opinion than getting into real estate (prematurely).

P.S: I am new to stocks, but end of Dec is the best time to get into some safe stocks (such a google), because by summer all half-decent stocks SHOULD generate you some revenue (again - nothing is garuanteed - just some observations).

[grant]

What are the average monthly payments of a condo anyway? If it's past 1500, then I'm definitely out of the ballpark. Might be better to stick with my $600 rent and start up a business.
Do you plan to "start up a business" without any cash flow or profit projections?

If not, then why do you want to do that with buying a condo?

"Those who fail to plan, plan to fail."

[elty]

You are looking at around $650 per $100K of mortgage. I would not buy a condo in any sub prime location, but that's just me.