Should I buy a condo apartment or a freehold home in Mississauga?

How to Choose the Right Property Type?

Choosing the Right Property Type for Your Mississauga Lifestyle

We often receive this question, so let’s address it logically. The critical factor to consider is your mortgage qualification.

Your decision should be based on what amount the bank can approve you for a mortgage loan.

Below, we’ll explore both types of properties (freehold and condominium) and help you determine which option may be more suitable for you.

Freehold properties vs. condominiums (condo apartments or condo townhouses)

Demand and Supply

It is commonly perceived that investing in a freehold home in Mississauga is more prudent, as historically, freehold properties in the area have experienced greater appreciation than apartments, and there is also a restricted supply of freeholds. However, it’s essential to note that a significant portion of the population earns lower incomes compared to higher-income earners.

Consequently, there will consistently be more real estate investors qualifying for less expensive properties than for expensive ones. This increased demand for lower-priced properties results in a larger market for them. Additionally, lower-priced properties generally have more potential for growth compared to higher-priced ones. Therefore, as these lower-value properties (condo apartments and condo townhouses) appreciate in the future, there will still be a greater number of home buyers capable of purchasing them compared to higher-value freehold properties (detached homes).

Initial Down payment

Any freehold property in Mississauga costs upwards of $1 million, necessitating an investor to provide a 20% down payment along with other home purchasing expenses. In contrast, a starter condo apartment in Mississauga typically costs almost half of that amount. This means that the initial down payment for a condo apartment can be half of that required for a detached home.

Rental income and cash flow

The price-to-rent ratio serves as a metric for assessing the financial advantage of buying versus renting a property. It’s calculated by dividing the purchase price of a property by the annual rental cost. It can also be used to compare different property types in Mississauga neighbourhoods.

A lower ratio indicates that buying is more favourable, while a higher ratio suggests that renting may be preferable. Similarly, a lower ratio can imply that the property is more favourable for investing compared to one with a higher ratio. When comparing rent versus buying prices, detached homes may yield a smaller return on investment (ROI) compared to condos that are of lesser value.

When talking about cash flow, remember it is important to minimize the negative cash flow in real estate investment. One should take necessary steps to avoid being house poor, as discussed in our recent blog post.

Repairs and Improvements

When investing in older properties, it’s essential to plan at least 10 years ahead. For instance, a freehold home in Mississauga that is already 15 years old will likely require significant home maintenance, improvement or renovation, including a new roof, windows, appliances, furnace, A/C, flooring, bathrooms, and paint, when it’s time to sell it after 10 years. This principle generally applies to most properties that are 15 years or older.

In contrast, a condo apartment may require less extensive renovation. Typically, replacing floors, bathrooms, kitchen, appliances, and paint should suffice.

A good investment property should meet several criteria: it should be located in a good neighbourhood, attract top quality tenants, cover most expenses from rental income, be easy to maintain or improve, and be easy to sell.

Crucial to Plan an Exit Strategy

Before purchasing an investment property, it’s crucial to plan an exit strategy. It’s wise to enlist the help of an experienced Realtor who can assist in securing the right property and renting it to qualified tenants, as selecting the right tenant is essential. Sometimes, investors may be swayed by passion or desire for higher returns, leading them to make decisions based on future growth without fully analyzing the situation.

For further information on selecting investment properties, including both Mississauga condos and Mississauga freehold properties, please feel free to contact us at 905-339-5111.

In addition to Mississauga, we serve MiltonBramptonOakvilleBurlingtonHamiltonKitchener-Waterloo-CambridgeYorkDurhamToronto and other markets in & around the GTA, based on client requirement.

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