For many homeowners and prospective purchasers in Toronto, the condominium property type is alluring, but we find this especially true of first-time homebuyers, young urban professionals, and empty nesters looking to downsize.

For those who love a lock-up and go space, dream of walking to work, or can’t afford the big sticker price of a freehold house, the city condo is a great housing choice.  However, when purchasing a condominium, several factors unique to this housing form influence your quality of life as a resident owner. There are also some potential risks when addressing its asset growth as a suitable investment.

Here we provide five points to guide your fiscal and emotional due diligence to consider before making a purchase:

Who Is Your Neighbour?

We encourage you to exercise due diligence and explore whether the condominium you’re interested in is in a building predominantly owned by investors or if it’s predominantly permanent residents. First, if your building is dominated by investors and renters, as opposed to owner-occupants, you could expect your neighbours to cycle through at a more rapid pace. From our experience, if a building is prone to a high level of transience, the ability to nurture a collective community spirit is diminished.

There also exists an additional layer of vulnerability. If several investors decide to liquidate their assets at or around the same time, the value of your property could plummet as collateral damage. There is a definite relationship between the growth of an asset and the frequency that this asset changes hands, which is a point ot consider.

Also to consider in this category, because of the nature of the close proximity of residents in a condominium, what sort of community do you see yourself in? Do you want to be surrounded by retirees, professionals or young families? Certain buildings and areas will appeal to different demographics, or promote a mix. And don’t forget that renters do not demonstrate the same pride of ownership that owners do, so the wear and tear on common areas could be greater in a building dominated by tenants.

The Value Of The Unique 

As you may have heard us iterate before, if there exists any vulnerability in the Toronto property market, it rests squarely at the feet of condominium high-rises. (Read our most recent post about the condo market here: Dear Urbaneer: What’s Going On With The Toronto Condo Market?)  This is mostly because of the abundance of stock, but also because of the ubiquitous ‘sameness’ of said stock. Basically, it’s hard to fetch top dollar when you are one in a mass of others. As we’ve written before, if you buy a one-bedroom suite in a 500-unit 40-floor tower, there’s a good chance there are around 300 suites similar to yours in the same building that vary only by floor height, exposure and level of upgrades. If that tower is surrounded by ten other towers of a similar vintage, the resale value of your unit is completely dependent on the most desperate of many sellers at any given time. Does that make a wise investment?

We encourage our buyers to seek out the special, with unique features and qualities that create some distinction in the marketplace. Features like an intelligent space plan (the city is rife with bad design and inefficient layouts), additional parking, ceiling heights higher than 8 feet, a postcard vista, larger than conventional outdoor space and quality stylish finishes all will go far to help your suite stand out from the crowd, should you decide to sell.

Monthly Fees

Unlike a freehold house, where you as the homeowner bear the entire responsibility for upkeep in and around your home, condominium living offers a convenient, turn-key lifestyle where much of this is done for you – including things like snow removal, landscaping, maintaining and repairing common areas and amenities like hallways, pools, gyms and party rooms – paid by the owners in the form of a unit common fee that is typically calculated based on the size of each suite.

Of course, these conveniences come at a price. Before you select your condo, you should consider the amount of monthly common fees you’re comfortable with and what services you’d like included. For example, a multi-tower complex can economically support a full-service concierge and comprehensive amenity space with pool, gym, and recreation facilities, given the cost is spread across many owners. Conversely, a small building with fewer owners will likely have significantly higher fees… and possibly fewer amenities. If you find a condo for sale that looks like it might be a good fit, first request the Status Certificate and look at the financial statements and board meeting minutes to see what the real state of affairs is like. Then you can make the decision as to your comfort level with that data. Also, ask yourself, do you really require all the amenities you’re drooling over? Will you truly use them? Don’t get sucked into the hype of a virtual golf room, or a city vista swimming pool with cocktail bar, only to discover no one ever uses them. Will you, if you’re the only one floating up there alone?

So, monthly fees are an important consideration, not only for your own budgeting, but also for and for determining the overall “value” of your living experience. Here’s a great blog about understanding common fees: Unpacking The Metrics Behind Toronto Condo Fees.

The Condominium Rules and Regulations

When you purchase a condominium, you should review all the condominium documents in advance of making your purchase firm and binding. When reviewing these, it’s imperative you also read the rules and regulations to determine how heavy-handed – or loose – they are. Do the rules fit your lifestyle? How much control do you have over your outdoor space? Can you BBQ on your patio? Can you operate a home-based business? What about pets? Do your window coverings have to be a specific colour or type? If you want to use the party room, do you have to wrap up by 10:00 pm even though the party is just getting started? These are the types of questions that are worth asking.

Our examples above may not all apply to you, but if some do, and you don’t anticipate restrictions, you might be stuck with rules you find constrictive.

You should also look at the Condominium Board meeting minutes and/or canvass building residents to get an understanding of any common complaints, which may suggest a problem that does not immediately meet the eye.

The Reserve Fund

What about the condominium’s reserve fund? Condo associations have money on reserve to attend to repairs and the like. In fact, condominiums are required by law to do a Reserve Fund Study, conducted within the first year after the condominium registration, and a new Reserve Fund Study generally every three years thereafter. This report should be included with the due diligence package that accompanies the condominium documents.

The Reserve Fund Study covers collectively owned building components like external walls, roofs, windows, heating/cooling systems, common corridors, underground parking, elevators, storm and sanitary systems, water main, and all collectively owned common areas.

The objective of a Reserve Fund Study is to gauge the condition of these components and prepare a schedule in advance for their maintenance, repair or replacement. In tandem with this engineering assessment, the study is obliged to establish a comprehensive savings program that ensures sufficient funds are available in the collective savings account when the fixes are required, so that condominium owners do not have to make up any financial shortfall by paying a Special Assessment. A Special Assessment is a charge that may be levied against a condominium unit by the board of directors of the condominium corporation if it lacks sufficient funds to complete repairs.

When you review the condominium documents, ensure that the Reserve Fund Study has been executed per the required timeline, and whether it’s recent or older. Do the numbers, dollar amounts and timeline all connect logically? If there is not enough on reserve, you might be looking at greater expenses should the need for more building repairs arise during your tenure.

Thinking of dipping your toes into the condo market and starting a search for a new pad? We’d be delighted to assist!

Here’s a condominium unit we sold where the reasonable monthly fees cover it all: hydro, water, heating/cooling, common elements, and building insurance! Plus, it boasts a healthy Reserve Fund, a bundle of amenities to rival most newer condos, and an excellent management team. How amazing is that?!

We call it: Swizzle & Shake At The Cosmopolitan Condo Near Yonge & Wellesley Street East, NOW SOLD!

Want to have someone on your side?

Since 1989, I’ve steered my career through a real estate market crash and burn; survived a slow painful cross-country recession; completed an M.E.S. graduate degree from York University called ‘Planning Housing Environments’; executed the concept, sales & marketing of multiple new condo and vintage loft conversions; and guided hundreds of clients through the purchase and sale of hundreds of freehold and condominium dwellings across the original City of Toronto. From a gritty port industrial city into a glittering post-industrial global centre, I’ve navigated the ebbs and flows of a property market as a consistent Top Producer. And I remain as passionate about it today as when I started.

We’d love to introduce our services to you.

Serving first and second-time Buyers, relocations, renovators, and those building their long-term property portfolios, our mandate is to help clients choose the property that will realize the highest future return on their investment while ensuring the property best serves their practical needs and their dream of “Home” during their ownership.

Are you considering selling? We welcome providing you with a comprehensive assessment free of charge, including determining your Buyer profile, ways to optimize your return on investment, and tailoring the listing process to suit your circumstances. Check out How Urbaneer Sold An East York Bungalow ‘Estate Sale’ For Redevelopment to learn more about what we do!

Consider letting the Urbaneer Team guide you through your Buying or Selling process, without pressure, or hassle.

The pleasure would be ours.

Thanks for reading!

-The Urbaneer Team

Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-800

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