July 17th, 2014
Should I buy a condo apartment or a freehold home in Mississauga?
This is a question that I get asked all the time!
A common perception is that investing in a freehold home in Mississauga makes more sense, given that historically freehold homes in Mississauga have appreciated more than apartments, plus there is also a lack of supply when it comes to freeholds.
When investing in older properties, one should think at least 10 years ahead. For example, a freehold home in Mississauga that is already 10 years old, will need a new roof, windows, appliances, furnace, A/C, flooring, bathrooms, paint etc. when it is time to sell it after 10 years. This should be applicable for most properties that are 20+ years in age.
A condo apartment on the other hand may not need an extensive overhaul. In the case of the latter, simply replacing floors, bathrooms, kitchen, appliances and paint should do the trick.
In both cases, putting 30% -35% down payment should be in enough to carry the monthly property expenses through rental income. However, a condo apartment (a decent 1 BR Mississauga condo sells for around $240K), needs a smaller down payment as compared to a freehold property (3 BR semi in Mississauga sells for around $530K).
Like with any other investment, real estate investing makes sense as long as one does not go overboard.
A good investment property should be:
- in a great location
- affordable to buy as an investment property
- easy to rent, or in other words it should be popular with renters
- able to carry all of its expenses from the rental income
- easy to maintain/repair/improve
- easy to sell
Before buying an investment property, one should simultaneously plan an exit strategy. It is prudent to select the right person who can not only help secure the right property, but also help rent it to qualified tenants (very important). Sometimes passion/ desire for higher returns, takes over logical thinking and people make their decision based on the future growth without fully analyzing the subject matter.
Investment property and ROI
Investing is about generating wealth and return on investment (ROI) works best on leveraging. Real estate investing makes little sense when an investor puts 100% down when properties grow at a mere 3% to 5% on an average. Leveraging makes ROI mind boggling and helps create wealth.
A word of caution: Leveraging can also generate losses if the prices fall or the interest rates increase.
In my opinion, one should invest in properties that are most popular with renters.
Tell me, why should I rent if I can afford to buy with 5% down payment?
Out flow on a 1 BR condo is $1,600 per month, as seen in the above blog link.
The above figure also hints that maximum number of renters in Mississauga are available for properties that rent within $1,300 to $1,700 per month price range. So shouldn’t one fish where the fish is?
For more on selection of investment properties, both condos and freeholds, contact me at 905-339-5111
Related link: Historic Stats (includes all residential properties, both homes and condos) – Toronto MLS Sales and Average PricesTags: invest in homes or apartments, Real estate Investing