Real Estate

Condo Investment property in Waterloo

  • Last Updated:
  • Apr 19th, 2021 7:32 am
[OP]
Member
Jun 23, 2017
215 posts
108 upvotes

Condo Investment property in Waterloo

Hi Rfd peeps,

I am about to sign an agreement for a condo roughly 620 sq ft in Waterloo. Price is $475k with parking included. 10 minutes walk from University of Waterloo. 1 bed + 1 den. The closing is in 2023. Maintenance 0.35 per sq ft and similar 20% by closing deposit structure. Apparently builder is also guaranteeing $2k rent per month for 2 years. How does that work? This is all I can afford unfortunately. I would have been interested in towns in Kitchener which I heard were $640k but there are none available in preconstruction?

All in all, do you feel this condo is a good investment? It’s my first ever. I am comfortable where I live and solely am buying this for purpose of renting out to family or students. Thanks
Last edited by ninjasmilez11 on Apr 18th, 2021 3:58 am, edited 2 times in total.
14 replies
Member
Mar 14, 2018
287 posts
344 upvotes
ninjasmilez11 wrote: Hi Rfd peeps,

I am about to sign an agreement for a condo roughly 620 sq ft in Waterloo. 10 minutes from University of Waterloo. 1 bed + 1 den. The closing is in 2023. Maintenance 0.35 per sq ft and similar 20% by closing deposit structure. Apparently builder is also guaranteeing $2k rent per month for 2 years. How does that work? This is all I can afford unfortunately. I would have been interested in towns in Kitchener which I heard were $640k but there are none available in preconstruction?

All in all, do you feel this condo is a good investment? It’s my first ever. I am comfortable where I live and solely am buying this for purpose of renting out to family or students. Thanks
You didn't mention the price so impossible to answer your question.
Jr. Member
Mar 3, 2021
154 posts
87 upvotes
620 sqft is pretty good size for a 1+1. 10 min driving or walking? I think it's a good investment if its walking distance 10 min to both Waterloo and Laurier.

But keep in mind that it's good for rental cash flow, but doesn't mean it will have great appreciation. IMO Waterloo/Kitchener is still pretty dead with only Google and Insurance companies being the main job attraction.
Member
Dec 23, 2012
427 posts
434 upvotes
RICHMOND HILL
TVBuddies wrote: 620 sqft is pretty good size for a 1+1. 10 min driving or walking? I think it's a good investment if its walking distance 10 min to both Waterloo and Laurier.

But keep in mind that it's good for rental cash flow, but doesn't mean it will have great appreciation. IMO Waterloo/Kitchener is still pretty dead with only Google and Insurance companies being the main job attraction.
the universities have a huge number of jobs, and there are many more tech companies than just Google, though it's the most prominent for sure. prices in KW have been shooting up faster than the GTA. not saying the condo will appreciate the same, this kind of rental's value is tied to the market rents mostly.
[OP]
Member
Jun 23, 2017
215 posts
108 upvotes
It’s 10 minutes walk to Waterloo main campus. I am hoping to rent it for $2k plus per month and planning on selling it on appreciation in about 7-8 years
Jr. Member
Mar 29, 2016
183 posts
140 upvotes
Toronto
What is the name of the project if you don’t mind sharing ?
Newbie
Jul 5, 2012
21 posts
73 upvotes
MISSISSAUGA
I think that's a decent price mind you a condo Kitchener is around 20% higher this same condo would be around $550K, especially the Grand River South area a couple of projects sold out within 24 hours. Condo market will defiantly make a turn for a positive once we start to get immigrants into the country. I think buying now is good its at a good rate. Take the jump! No way you can get a town in Kitchener for 640k, their going for 750K and with 5000+ people waiting for 50 units.
realtor
Deal Expert
User avatar
Feb 11, 2009
18927 posts
6798 upvotes
Toronto
OP - Don't fall for the 'Guaranteed Rent' marketing. Its basically them subsidizing the rent for a couple years and covering the difference.

SAGE is notorious for this in the Waterloo area. There's a lot of re-sale units in the area where you'll get much better value if you have the means to buy that today vs the need to spread out the deposits over a couple years.
Real Estate Agent, MAcc, CPA, CA
[OP]
Member
Jun 23, 2017
215 posts
108 upvotes
deal_with_singh wrote: OP - Don't fall for the 'Guaranteed Rent' marketing. Its basically them subsidizing the rent for a couple years and covering the difference.

SAGE is notorious for this in the Waterloo area. There's a lot of re-sale units in the area where you'll get much better value if you have the means to buy that today vs the need to spread out the deposits over a couple years.
What do you mean by them subsidizing? My understanding is that the builder is so overly confident about the rental that they are willing to give $1995 or cover the portion till $1995. For eg if it goes to rent for $1500, they pay rest of $495. Not seeing anything bad here?
Jr. Member
Mar 3, 2021
154 posts
87 upvotes
Mosho1 wrote: the universities have a huge number of jobs, and there are many more tech companies than just Google, though it's the most prominent for sure. prices in KW have been shooting up faster than the GTA. not saying the condo will appreciate the same, this kind of rental's value is tied to the market rents mostly.
LOL even Google is having some trouble getting younger candidates to move to Waterloo since it's literally dead town... And most people who are in the area own houses. 10 min walking distance only caters to majority students.
Newbie
Oct 10, 2020
58 posts
28 upvotes
TVBuddies wrote: LOL even Google is having some trouble getting younger candidates to move to Waterloo since it's literally dead town... And most people who are in the area own houses. 10 min walking distance only caters to majority students.
I also wonder how these fairly big tech companies in Waterloo will be with the whole WFM thing as well. I did interviewed at a tech company in waterloo and they mentioned it was a full WFH but they'd give me a desk if I wanted to do both. I would imagine/hope most tech companies are more progressive and less annoying when it comes to WFH
Deal Expert
User avatar
Feb 11, 2009
18927 posts
6798 upvotes
Toronto
ninjasmilez11 wrote: What do you mean by them subsidizing? My understanding is that the builder is so overly confident about the rental that they are willing to give $1995 or cover the portion till $1995. For eg if it goes to rent for $1500, they pay rest of $495. Not seeing anything bad here?
It's most likely the Realtor who's guaranteeing you the rent.

Think about it this way...

If market rent is $1500, and they're guaranteeing you $2k. What they're basically saying is that they are giving you 'a discount on your purchase price' of $500/month for 24 months = $12k as a rebate. Commission on such projects for Realtors is anywhere from 4-6%. Even at 4%, on a $500k property, if they're getting $20k, and have to pay you $12k back...they still made their money.

Now after the 2 year period...when your rental revenue drops to $1500...then what?
Real Estate Agent, MAcc, CPA, CA
[OP]
Member
Jun 23, 2017
215 posts
108 upvotes
deal_with_singh wrote: It's most likely the Realtor who's guaranteeing you the rent.

Think about it this way...

If market rent is $1500, and they're guaranteeing you $2k. What they're basically saying is that they are giving you 'a discount on your purchase price' of $500/month for 24 months = $12k as a rebate. Commission on such projects for Realtors is anywhere from 4-6%. Even at 4%, on a $500k property, if they're getting $20k, and have to pay you $12k back...they still made their money.

Now after the 2 year period...when your rental revenue drops to $1500...then what?
Then in that scenario it would be a decision to either pay some of the mortgage out of my pocket or sell the place. I am hoping that although it is a condo, it will appreciate to atleast $580k in 4 years from its $475k purchase price
Deal Expert
User avatar
Feb 11, 2009
18927 posts
6798 upvotes
Toronto
ninjasmilez11 wrote: Then in that scenario it would be a decision to either pay some of the mortgage out of my pocket or sell the place. I am hoping that although it is a condo, it will appreciate to atleast $580k in 4 years from its $475k purchase price
In almost any condo investment you’ll be paying out of pocket. In Waterloo there are some exceptions, especially those 4-5 bedroom condo units which can land you a nice cash flow, but have limited if any growth from a capital perspective (some are actually negative even from 5 years ago)

You have to ask yourself, under what assumptions will it increase to $580k? What would cause the rental or capital value to amount to what you see in downtown?

Even with the rental guarantee, like I said you should be treating that as a rebate on the purchase price, and not factor that part into your cash flow calculations
Real Estate Agent, MAcc, CPA, CA

Top