Real Estate

Buying a 2 bedroom condo and renting out one room, or buying a one bedroom

  • Last Updated:
  • Oct 16th, 2017 2:58 pm
[OP]
Newbie
Sep 3, 2017
20 posts

Buying a 2 bedroom condo and renting out one room, or buying a one bedroom

Hi folks,
We would like to buy a condo in downtown Toronto. We (a couple) can either buy a one bedroom condo, or buy a 2 bedroom and rent out one one the rooms. In both scenarios what we pay out of our pocket each month is more or less the same (more mortgage in case of 2 bedroom, but we also get rent). However, we have more equity at the end of the month if we buy a 2 bedroom. The downside is we have less privacy, and potential hardships of living with someone else!
What do you think? Is it a good idea to buy a 2 bedroom?! Do you have any experience in a similar situation?
Any feedback is highly appreciated :-)

PS: I think buying a 1bedroom, and maybe another studio as an investment property would be more expensive overall, and getting a mortgage for the second property is more difficult!
32 replies
Member
Mar 20, 2017
209 posts
221 upvotes
Current condo prices and YOY are unreasonably high, while detached/semis are unreasonably low.
I would not recommend to think about condos unless you have no other choice. Mid and long term a freehold will be a better win.

Speaking about immediate return (cashflow), condo fee plus utilities plus mortage interest will make a pretty negative cashflow for condos.
Meanwhile, freehold houses can have a positive or neutral cashflow now (especially for rooming houses and airbnb).

Speaking about privacy, freehold has basements, there are duplexes/triplexes etc...It grants your more privacy and a separate unit.

Its not a general rule, it is how things are now, possible to find really good deals for freehold.
Member
Jun 15, 2017
263 posts
118 upvotes
Suggestion can be given base on budget.

Is living in downtown must?
[OP]
Newbie
Sep 3, 2017
20 posts
Thanks GalvToronto, and Lavaris, for your replies. We are looking at the 700k-800k range. If we want to buy a freehold, we need to go further out considering our budget. So we need to take into account the costs of owing a car (We don't have one now) + transport (Maybe go train), and also commute time!
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Dec 27, 2009
3379 posts
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Ottawa, ON
GalvToronto wrote:
Oct 12th, 2017 9:22 pm
Current condo prices and YOY are unreasonably high, while detached/semis are unreasonably low.
I would not recommend to think about condos unless you have no other choice. Mid and long term a freehold will be a better win.

Speaking about immediate return (cashflow), condo fee plus utilities plus mortage interest will make a pretty negative cashflow for condos.
Meanwhile, freehold houses can have a positive or neutral cashflow now (especially for rooming houses and airbnb).

Speaking about privacy, freehold has basements, there are duplexes/triplexes etc...It grants your more privacy and a separate unit.

Its not a general rule, it is how things are now, possible to find really good deals for freehold.
There is nothing "unreasonably low" right now, but I do agree that freehold is better than condo.

As to OP's question, buy the one bedroom. Your relationship won't likely last having to have roommates (a tenant in your second bedroom is a headache waiting to happen).
Member
Jun 15, 2017
263 posts
118 upvotes
rfdquestion wrote:
Oct 12th, 2017 9:55 pm
Thanks GalvToronto, and Lavaris, for your replies. We are looking at the 700k-800k range. If we want to buy a freehold, we need to go further out considering our budget. So we need to take into account the costs of owing a car (We don't have one now) + transport (Maybe go train), and also commute time!
I would buy one BR and one Bachelor unit.
I stay in one BR and lease bachelor
When i want to move out to freehold later on, i can sell one and keep other unit
I get much needed privacy in one BR aganist shared 2 BR with a roommate
When you want to sell, liquidation is key, you dont need to sell all yours
Deal Addict
Nov 22, 2004
1140 posts
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+1 for 1BR for additional privacy, then balance for perhaps another rental property.

One alternative can also be, if you are not particular about downtown living only, that you buy a townhouse with a finished basement in one of the suburbs then rent out the basement. Typically, the appreciation of property is due to the value of the land, hence the rate of appreciation for detached/semi/town is more than condos. There's a decent chance that you'll be able to buy a freehold town with your budget in the neighbouring areas. Your rent will be similar as renting out a room in 2BR, you'll have more privacy, and a bigger property with more room. Just food for thought.
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[OP]
Newbie
Sep 3, 2017
20 posts
Thank you all for the feedback. Very important things to consider before making a big decision.
One more thing to take into account is you can airbnb your extra room (Maybe a better option than renting regarding earnings and privacy?!) However, according to new rules you cannot airbnb if it is not your primary residence... I am not sure if this law is enforced, though!
Thanks again for all the feedback.
Deal Addict
Feb 22, 2011
1676 posts
1475 upvotes
Toronto
rfdquestion wrote:
Oct 13th, 2017 3:41 pm
Thank you all for the feedback. Very important things to consider before making a big decision.
One more thing to take into account is you can airbnb your extra room (Maybe a better option than renting regarding earnings and privacy?!) However, according to new rules you cannot airbnb if it is not your primary residence... I am not sure if this law is enforced, though!
Thanks again for all the feedback.
Just an FYI that is not a law, it was a rumor but nothing has been passed. In fact recent articles have indicated CMHC is turning to AirBnB to help with supply so I doubt regulations are coming.

Personally if it were me I would buy the 2 bedroom and rent out the other room but it really depends on your comfort level with strangers. My wife and I rent out the extra rooms in our house in the burbs through AirBnB and it covers 100% of the carrying costs. I stayed at an AirBnB where the guy rented a 2 bedroom and Airbnb'd the other room. He told me in the 2 years he had been doing it he never had to pay any portion of the rent.
Last edited by rjg4235 on Oct 13th, 2017 3:52 pm, edited 1 time in total.
Deal Addict
Feb 2, 2014
3963 posts
768 upvotes
Toronto
rfdquestion wrote:
Oct 13th, 2017 3:41 pm
Thank you all for the feedback. Very important things to consider before making a big decision.
One more thing to take into account is you can airbnb your extra room (Maybe a better option than renting regarding earnings and privacy?!) However, according to new rules you cannot airbnb if it is not your primary residence... I am not sure if this law is enforced, though!
Thanks again for all the feedback.
According to the rules, you can't rent out the room at all. Condos are single family dwellings...property manager probably won't allow it. I'm not saying people don't do it or you can't get away with it, but the property manager probably will have an issue with it if they find out.

Just giving you some added info to digest.
Last edited by CdnRealEstateGuy on Oct 13th, 2017 3:52 pm, edited 1 time in total.
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
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Feb 22, 2011
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Toronto
CdnRealEstateGuy wrote:
Oct 13th, 2017 3:52 pm
According to the rules, you can't rent out the room at all. Condos are single family dwellings...property manager probably won't allow it. I'm not saying people don't do it or you can't get away with it, but the property manager probably will have an issue with it if they find out.
That is not the case in all buildings, is it even in most? I would say between friends and family I know of a dozen buildings and only 1 of them out right bans short term rentals.
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rjg4235 wrote:
Oct 13th, 2017 3:54 pm
That is not the case in all buildings, is it even in most?
It's case for all condo apartments to my knowledge.

They are single family dwellings. How can they rent it out to another party and live in their too?
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
Deal Addict
Feb 22, 2011
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Toronto
CdnRealEstateGuy wrote:
Oct 13th, 2017 3:55 pm
It's case for all condo apartments to my knowledge.

They are single family dwellings. How can they rent it out to another party and live in their too?
According to whom? Like a city by law?
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Feb 2, 2014
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Toronto
rjg4235 wrote:
Oct 13th, 2017 3:56 pm
According to whom? Like a city by law?
Yes.

And some property managers do enforce it...I have witnessed it.
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
Deal Addict
Feb 22, 2011
1676 posts
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Toronto
CdnRealEstateGuy wrote:
Oct 13th, 2017 3:59 pm
Yes.

And some property managers do enforce it...I have witnessed it.
Do you know the by law? I find it incredibly hard to believe it's illegal to rent a room out. There are thousands of postings online. If it is illegal they certainly aren't actively trying to stop people form doing it. I even remember reading stipulations in the residential act covering people just renting a room. I'll take another look though.

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