Real Estate

Why would you buy this condo?

  • Last Updated:
  • Oct 22nd, 2020 12:14 am
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24 replies
Sr. Member
Jan 5, 2020
826 posts
1128 upvotes
Can't say whether or not this buyer got a good deal. But this buyer is more sane than any precon buyer right now.

Maybe the buyer bought for self use or maybe they put in a huge down payment.
Newbie
Jul 9, 2020
20 posts
12 upvotes
It sold around the beginning of August; before the price drops (for condos) started becoming apparent.

Looking back now, bad deal was bad. Obviously the buyer had no idea what was going to happen in the next couple months.

Anyway, I think the prices will climb back but only after a year or so.
[OP]
Newbie
Apr 24, 2017
45 posts
76 upvotes
$580k mortgage at 25 years plus all other costs such as maintenance and taxes comes to about $2500. They're trying to rent it out for $1900. Even at 30 years amortization you're looking at paying $2300 as the landlord.
Sr. Member
Jan 5, 2020
826 posts
1128 upvotes
mazda31509 wrote: $580k mortgage at 25 years plus all other costs such as maintenance and taxes comes to about $2500. They're trying to rent it out for $1900. Even at 30 years amortization you're looking at paying $2300 as the landlord.
Maybe they dont have a mortgage. There's a lot of wealth out there
Deal Expert
User avatar
Jan 27, 2004
47093 posts
10262 upvotes
T.O. Lotto Captain
Because of price increases. $600/month loss isnt too bad. Because after one year the price will go up 10%.
10% of $580,000 is $58,000. That easily makes up for the $600/month loss.
Compound that by another 10% the following year... thats another $63,000!
Deal Addict
Jan 15, 2010
1294 posts
1524 upvotes
Toronto
Literally speculating (gambling) on price appreciation, as most investors have been doing in this market for a while now. Either that or money laundering and they don't even care about the purchase price.
Deal Addict
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Apr 12, 2013
2455 posts
1300 upvotes
Moon
Not sure why anyone would spend 1000 per sqft in that location when you can get the same in DT for even cheaper. I guess it does come with parking, I like this area too.
Koodo, Public Mobile, Lucky Mobile Customer
Deal Addict
Mar 2, 2017
2436 posts
4332 upvotes
Toronto/Markham
mazda31509 wrote: https://condos.ca/toronto/the-park-club ... 5-C4839514

Condo was bought for $580k and now the landlord has it up for rent for $1900.

What's the logic there? Bleeding about $600-$700 a month, at 25 year amortization including all fees
Just because it's cashflow negative doesn't mean it's negative ROI. Based on those numbers (if rented) it will cover all expenses and interest portion of mortgage, effectively breaking even.

That said, people have been doing this for a while speculating on appreciation.

Not saying this is worth doing or that it's a good 'investment', simply giving you the reasoning of the people who do this.

There are MUCH better ways to park 580k though, this is a pretty bad example of how to do it.
Realtor, Investor, CPA - Collaborate with like minded people
Deal Guru
Feb 22, 2011
10958 posts
13777 upvotes
Toronto
mazda31509 wrote: https://condos.ca/toronto/the-park-club ... 5-C4839514

Condo was bought for $580k and now the landlord has it up for rent for $1900.

What's the logic there? Bleeding about $600-$700 a month, at 25 year amortization including all fees
How do you know they are keeping the tenant? New owner can evict for personal use. If they like the building, unit and that price is fair to them it's really irrelevant what others think.
Deal Fanatic
Dec 20, 2018
5776 posts
4850 upvotes
mazda31509 wrote: https://condos.ca/toronto/the-park-club ... 5-C4839514

Condo was bought for $580k and now the landlord has it up for rent for $1900.

What's the logic there? Bleeding about $600-$700 a month, at 25 year amortization including all fees
You don't expect rent to go up over 25 years? The tenant will be paying the tmi and some of the principal as well and after 25 years , no more mortgage and it just generates cash flow less tmi

This is not even to taking into capital gains into account over this same period
Newbie
Feb 10, 2017
96 posts
84 upvotes
Negative cash flow doesn't mean its a negative ROIC.

E.g if you net 10k a year on 40k down and 7k top up from negative cashflow

ROIC
Y1: 10/47=21%
Y2: 10.2/54=19%
....
Y10: 12/110=11%

All else being equal and potential of appreciation = potential for special assessment

I'd argue this is would be still be a decent diversification to most investment portfolios. I'd compare "negative cash flow" to the reinvestment risk of dividends and interest.
Member
Feb 8, 2017
277 posts
150 upvotes
webester wrote: Totally agreed. At 580k plus maintenance fee, this is a crappy investment. Loads of better opportunities around.
Could you list some here? I have cash im sitting on and need to invest asap
Deal Addict
Jan 15, 2010
1294 posts
1524 upvotes
Toronto
1LoveToronto wrote: Negative cash flow doesn't mean its a negative ROIC.

E.g if you net 10k a year on 40k down and 7k top up from negative cashflow

ROIC
Y1: 10/47=21%
Y2: 10.2/54=19%
....
Y10: 12/110=11%

All else being equal and potential of appreciation = potential for special assessment

I'd argue this is would be still be a decent diversification to most investment portfolios. I'd compare "negative cash flow" to the reinvestment risk of dividends and interest.
This basically sums it up. It seems like investors have been banking on capital appreciation in their calculations for a long time now. Though I'd argue that's a very bad idea in the short term (next 5 years). Assuming you can increase property value by 20k a year is in no way a safe assumption right now. Prior to 2016 the Toronto condo market had been relatively flat for about a decade (only gaining 2-3% a year). If we ever return to an environment like that, holding a cashflow negative property will hurt. And investing in stocks will likely turn out to be a much better idea.
Deal Fanatic
Mar 27, 2004
6093 posts
3984 upvotes
Toronto
This is like asking why are people buying precon condos for 1100$ a sqft , when the local area is selling for $900.
Full-time Realtor
Sr. Member
Jul 7, 2019
705 posts
561 upvotes
moeymoeymoeymoe wrote: How do you know their bleeding 600-700. Could have bought the condo in cash.
Yah not sure why its assumed the buyer put down the min 20% down.
Also, the buyer could have plans to rent it out in the short term and eventually move into it later on as their primary residence. Know several ppl that did the latter, and agreed on a short term lease with a tenant, bc they didn't want to leave ther unit empty (paying 2 mortgages) while they got their life/moving details in order.
Deal Addict
User avatar
Apr 27, 2005
2118 posts
519 upvotes
Scarborough
This is a horrible deal. Less than 600 sq ft for a 1+den with two washooms??!?!

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