Just read this interesting post in Toronto Star about iconic Trump Tower. Some new builder condo investors who had bought hotel condominium suites at the Trump Tower in 2006 are refusing to pay final closing costs and assume ownership of the units. They are saying that their investments no longer make financial sense.

Well, I am not surprised. This is what I had blogged about some time ago when One Bloor went up for sale.

Read more about User, Investor and Flipper and to find out what type of investor you are before venturing into buying on mere media hype.

Have a nice day!

Downtown Toronto Condos Vs. Downtown Mississauga Condos

Downtown Toronto Condo market is currently super-hot! Media is projecting some mixed views; someone is calling it a bubble and others a simple demand and supply issue.

As per a study, Toronto has some 148 condo towers (either in planning stage, starting to be built, under construction etc.) on the go.

The most important question being asked is whether there is so much demand, for that kind of supply?

Don Cambell (REIN) an expert in Canadian real estate, is of the view that there may be too much supply.
 

Disconnect between New builder Prices and Resale Prices

Working on a worse case scenario, I feel that the return on investment may not be great when one looks at prices of some new builder condos in the Downtown Toronto core. Just to give you an example, today's resale condos in Downtown Toronto, sell at an average price of $550 per sq. ft. At the same time, many Downtown Toronto condos are being sold at $750-$800 per sq. ft. Many experts, and some of my RE/MAX broker colleagues who specialize in condos, agree that it may not be possible for these high priced new builder condos to meet or beat the future resale condo prices of 2014-15.

Looking at the TREB's historic data, one may assume that Downtown Toronto market can be projected to grow at a yearly rate of 5.5%. This relates into $645 p.s.f. price in 2015 (based on $550 p.s.f price of resale condo in today's market). This disconnect between the resale condo market and the pre-construction market can be risky for short term investors/flippers.

Many investors are betting that prices will keep on rising

The resale market is populated by end users. Income of these buyers is not rising at the same pace. Chances are that many so called short term investors/flippers (buyers of $750 p.s.f. + range) might become forced landlords. Some may even live on negative cash flow if they do not put down a substantial down payment. What if the interest rates reach 5% by 2015?

Rental market can change

Rental price growth might also become slow in 2015: With competition from unsold inventory, investors will compete for tenants. Today, an average rent of a one bedroom unit without parking to a one plus one with parking is $1550 -$1750. For two bedroom units one can expect to pay from $2100 without parking to $2500 with parking. Current rental market is very tight and the market is on landlord's side.

What about price to rent ratio? Based on above numbers, an average price of resale Downtown Toronto resale condo (600 sq. ft.) is approx. $330,000. Rents for $1,750 with parking. The price: rent ratio of 6.3%, in today's market.

Downtown Mississauga is the place to invest!

To my surprise one of the condos experts called the 905 region (Mississauga falls in 905 dialing code) as not a great place to invest. This is absolutely a myth and a statement without much research and analysis of actual facts. Well, Mr. Expert, Downtown Mississauga has better appreciation (7.21% year/year in Downtown Mississauga vs. 5.47% year/year in Downtown Toronto), lower vacancy rate than Downtown Toronto (0.3% in Mississauga vs. 1.3% in Toronto), affordability is better, buy to rent ratio is similar and supply is controlled.

Being a local Realtor, I can vouch that things look pretty good in Downtown Mississauga. Downtown Mississauga condos have outperformed Downtown Toronto condos (C1 district) condos by whopping 31%. 

More reasons to invest in Downtown Mississauga

Price: An average one bedroom condo in Downtown Mississauga sells for at least $80,000-$100,000 less than Downtown Toronto's condo in the resale market (similar size and type). An investors is looking at approx. $25,000 to $30,000 more in cash (based on 20% down payment) for what he will end up paying after additional closing cost towards land transfer tax, to buy in Toronto.

Affordability: More the affordability, better the demand and price growth, it is that simple.

Price to Rent Ratio: Based on $245,000 average price of a one bedroom condo and yearly rental income of $15,600, the price: rent ratio comes to 6.3%. This is in line with Downtown Toronto market.

Supply: As of today, there are only 7 projects that are being offered as pre-construction, are under construction and are almost ready for interim occupancy. Supply of new condos is very tight; there is not much land available. City of Mississauga spends a lot of time in understanding the growth trends and keeps a close watch on development applications.

Rental market: The rental market has never been better. Not only, units rent fast but the quality of tenants is also good.

Many top Fortune 500 companies have based their Canadian headquarters in Mississauga. Mississauga is filled with thousands of young people and families that tend to be highly educated, upwardly mobile and very tech savvy. Rental properties in and around the Square One area in Mississauga get snapped up fast because of its network of GO and Mississauga Transit routes. Furthermore Islington subway is a mere 20 minute bus ride while the highways connecting to the 401, 427 and QEW are minutes away.

The new Sheridan college campus that opened this year is also attracting thousands of students from all over and many of them are looking to rent in the vicinity so as to cut their travel time.

Caveat emptor: Not every project provides same return (this is true for both Downtown Toronto as well as Downtown Mississauga). Novice investors make thousands of dollars less in return, by investing in wrong projects and prices, even for projects in the same vicinity and or being sold at President/Platinum prices. Contact me, if you are looking to buy a resale or a new builder condo in Downtown Mississauga or a perfectly priced project in Downtown Toronto.
 

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Related Post on Downtown Mississauga Condo Investment
 

You Must Act

When the inspiration (the psychological processes of thinking, feeling and willing) to work is there, then actual activity takes place with the help of the senses.

Many times, you might have read a good real estate investment article and got motivated to take action, but may have often shied away or got too busy with your lives and failed to act upon it. In my opinion, there is no need to feel bad, if there is something destined to happen, it will, no matter what. But for something to take place, you MUST take action.

Depending on what stage of life you are in, your goals can be different. Real estate is always a part of one’s adult life; of course, real estate goals may be different, for different people.

But life is more than just real estate, that's another topic for another time.

You are a Young Adult or Newcomer to Canada

If you are a young working adult, with a negligible debt and a good credit, you might be better of not renting. All you need is a five percent down payment to come a step closer to home ownership. Have you ever considered, how much you are contributing in making your landlord richer? What if you can afford to spend a little more than your monthly rent and opt for buying a property instead? You may well be able to pay towards your own mortgage.

You may want to read my blog post first time buyer or investor questions, and come attend my home buyer session.

You are a Parent of a Young Adult

Most people in this situation might be living in their own properties. Most of you are in the middle age group. Most of you have worked hard in your life and you are at a stage when you want to see your children get a head start in life. So here are some options that come to my mind:

You can either help your adult child buy his/her first home, or you may even consider buying a starter condo, and have one of your adult child or a child of your friend or relative rent it. In my opinion, one's own kin is the best tenant one can have.

You are planning to Invest

If you are planning to invest in real estate, the first and foremost thing to remember is that there is no gain, without pain.

Profit and loss, happiness and sorrow, night and day are inseparable parts of life. So, when you are expecting higher than average returns, you must also be ready to deal with tenants (good or bad), fixing properties, book keeping etc.

Sure, there is always help available and you can run your real estate investment, without worrying about day to day affairs. Professionals can be hired (real estate brokers like myself, property managers, accountants, landlord tenant paralegal companies) to buy the right type of real estate investment, property management, handling landlord tenant issues, property improvement, book keeping etc.

Who knows, one day your real estate investments might even help cover some or most of your retirement expenses!

You are a moving up or down

You can be a home or condo owner who is planning on buying a bigger sized property or someone who is considering moving into a smaller property. Both the above situations depend on what stage of life you are in. Depending upon your financial situation, you may even think of keeping both the properties, i.e., you may consider keeping one of the properties as a real estate investment.

You are retiring and want to leave your legacy behind

Your financial planner will be the right person to advise you on more ways you can use your fully paid property. Again, depending upon your needs and desires, choices can be many. For all of the above financial options, it would be prudent to consult with your financial advisor, accountant or lawyer. As far as real estate investment opportunities go, you can come and see me.

Come to me if Your New Year’s resolution revolves around Mississauga Real Estate

If you are a first time buyer, a move up or a move down buyer/seller, a seasoned investor or just someone who wants help to make a sound real estate decision, contact me, to buy or sell real estate in Mississauga.