22/08/2019 - 4 min
Guide to Purchasing a Condo
What are your intentions?
Are you an investor looking to rent or resell your home later? Or do you intend on using your property as your primary residence? For someone investing in a primary residence, the search can be narrowed down to quality of life, square footage, amount of rooms, desirability and location. Investors can make a more detached decision based on economic trends and speculation in terms of resale and rental price.
One indicator of an investment property’s potential income is its Gross Rent Multiplier (GRM). This figure can be obtained by dividing the home’s market value by its annual rent income. For example, if a property sold at $500 000 generates $25 000 in annual rent income, its GRM is 20. A lower GRM may indicate higher potential rent income. By researching different homes on the rental market, you can establish an ideal rent price and compare home prices.
What kind of home are you looking for?
One of the first decisions a home buyer makes it what type of home should they purchase. Detached houses offer more space including an outdoor backyard and possibly a shed or basement area. In most major cities, they are commonly found in car-friendly suburbs. Townhouses are built glued to each other, and often have two or three stories which are sometimes divided into different units. Most townhouses in Canada were built a century ago, before the advent of larger apartment buildings.
Condos, on the other hand, are built just like apartments, usually in buildings with multiple stories. This is the most frequent new type of construction on the Island of Montréal, as it offers a simpler and more affordable path to home ownership. In a condo building, land is divided among co-owners and managed through a condominium association. A condo owner is responsible for the maintenance of their own unit, but common grounds, such as hallways, yard, pool and garage are handled by the condominium association. If you’re not a renovation expert or don’t live in the same city as your home, this makes it easier to upkeep your home.
How many bedrooms will you need?
Most condominiums have one, two or three bedrooms. One bedroom condos are very popular among younger bachelors and couples with no children, which represents a majority of residents in downtown Montreal. Two bedroom units find many takers, including small families, students, couples and people who work from home. Larger and wealthier families enjoy more space, so they often prefer three bedroom units, sometimes with two or three bathrooms. When renting a home, there can be a significant price difference according to the number of bedrooms. By using the aforementioned GRM formula, you can effectively discover which homes offer the best return on investment.
What kind of location offers better potential appreciation?
Location is a key factor that can make or break a home’s value. In fact, two homes can have identical designs and be placed in separate locations, and their prices will be completely different. To learn whether a home’s location is attractive, the best advice we can give is to learn about the vicinity. Which services can you find nearby? How long is the commute to the central business district? Are there schools, day care centers, hospitals, pharmacies, grocery stores and metro stations in the area? Where are the nearest landmarks, museums and tourist attractions? You don’t need to be a local tour guide to know the answers to these questions. Just by exploring the city by foot or looking at an online map should help find out if your potential purchase is in an ideal location.