The Surprising TRUTH About Toronto Condo Investing in 2023

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Жыл бұрын

The Surprising TRUTH About Toronto Condo Investing in 2023
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►► Does Toronto Condo Investing still make sense in 2023? This real estate asset class is highly talked about, but what do the numbers look like in 2023? In this episode of Prime Properties TV, I reveal my go-to condo investing formula on how to determine if it's the right time to buy a Toronto Condo. You'll want to catch this episode of PPTV as I've honed in on how to determine if a condo is worth investing, from 10 years of experience down to 1 formula. With so many condo units available for sale, and many more condo units still being built as pre-construction condos, you'll want to have this handy formula in your real estate toolbox!
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Пікірлер: 32

@robertnitti5895 Жыл бұрын

Your assuming that all renters psy their rent. More and more renters are not paying

@lenhh Жыл бұрын

Amazing content!🎉

@PrimePropertiesTO Жыл бұрын

Ty sir 💪

@russiskv Жыл бұрын

Thanks Zhen for posting this video. The formula you shared is simple and easy enough to make quick comparison between different options. But in Toronto, if we look at the average capital appreciation within the past ten years, I believe it will be higher than the yield. So, not taking this fact into account would be super conservative approach, and makes it extremely hard to come across properties that satisfy this formula.

@PrimePropertiesTO Жыл бұрын

100% agree but that's the point. No one looks at yield and assesses based on cap appreciation. Then you have a year like the last two and you're royally screwed. You have no holding power if you have no backup or yield and your forced to liquidate. Depends on each person's cash flow.

@buttlesschap Жыл бұрын

Ten years of data isn't enough when comparing long term investments to the risk free rate. You can't just sell/skim the potential yearly capital appreciation either like you can with stocks.

@russiskv Жыл бұрын

@@buttlesschap Any investment has some risk. There is no risk-free investment. I used the ten years timespan as a long period of time. Even if we look at thirty years interval, the average appreciation rate would not be significantly different.

@sangavisivapalan2062 Жыл бұрын

This is a good starting point, but it would be best to consider the potential capital appreciation as well

@PrimePropertiesTO Жыл бұрын

Then you're speculating

@davidpatrickgreen5319 8 ай бұрын

You mean the capital appreciation of the condo or the capital appreciation of other alternatives for your money?

@MikesGoogleAcct Жыл бұрын

A more professional calculation will subtract Condo Fees and Real Estate Taxes from Rents and use the 5 year mortgage rate. Do not consider capital appreciation because on the long term it will lag inflation as the building gets older (buildings get run down or condo fees go up).

@rdefacendis Жыл бұрын

Agree...I would use "net rent" Gross rent minus; 1/ Condo Fees 2/ Insurance 3/ property taxes 4/ Annual anticipated maintenance divided by 12 So in the case of this video take that $2500 subtract probably $350 condo fees, $300 taxes $80 insurance and a maintenance budget of $2000/12 or $167 for a total net rent of approx $1600. 1600*12 = 19,200 19200/650,000 = 2.95% But the REAL return is how much skin do you have in the game (downpayment + closing costs) versus your net rent minus interest expense... Downpayment 130,000 Net rent minus interest 1600 - 2100 interest portion of pymt (@5%)= NEGATIVE Cash flow of $500 a month or $6000 a year. -6000/130,000 is a NEGATIVE CAP RATE OF -4.6% So how long are you gonna pay out of pocket for your investment? Only a foolishly bullish investor makes this sort of bet. Hoping and praying that 1/ interest rates fall 2/ he can raise the rent 3/ that his tenant always pays the rent 4/ and that his non-descript mini-condo will actually appreciate in value. Hope is not a plan. And when this investor sells 10 years down the road - he MAY get to brag about making a capital gain but he will conveniently forget to tell his buddies about all those years where he was cash flow negative and what his transaction costs were. Invest when you have an attractive POSITIVE CAP rate. The capital appreciation should only be the bonus kicker for you.

@GreenBeanGreenBean Жыл бұрын

@@rdefacendis positive cashflow is not necessary but a nice to have.....for example, you can reduce your amort table into 20 or 15 years and be extremely neg cashflow but you are paying off your unit quickly...doesn't mean you aren't earning a good % return. you are forgetting about the principal paydown, where you can still be 'earning' a 10-15% return but not seeing any of it in your pocket in that instant (or payin a small amount)....but the mortgage is going down so equity is building up regardless.

@rdefacendis Жыл бұрын

@@GreenBeanGreenBean I am not forgetting principal paydown .. that is part of capital appreciation... if you are not making money month to month as part of you cap rate it is a silly and reckless investment... I can make 6% a year in dividends investing in Bank of Nova Scotia stock ... the safest blue chip investment anywhere WITH capital appreciation and it cost me pennies to invest and to sell in an instant... why the heck would I deal with tenants, land transfer taxes, and maintenance issues... and sky high transaction costs... its a debt trap now that interest rates are higher (and they are NEVER, EVER coming down to 2% again...)

@PrimePropertiesTO Жыл бұрын

You're all neglecting this is a "back of the napkin" math. I'm not calculating cap rate lol.

@GreenBeanGreenBean Жыл бұрын

@@rdefacendis uh, take a look at any bank stock over a 5 year period, you haven't made ANY capital appreciation.....on the other hand actual real estate over the last 5 years is up like 100% and you can leverage that 5-1 with 20% down unlike anything you can do with bank stock..........and don't kid yourself, bank stocks don't do well if real estate isn't doing well. and if you look at any 20-25 year timeframe real estate beats bank stocks all day long too. principal paydown is NOT part of capital appreciation, if the real estate goes sideways for 20 years you have a place paid off. and yes, you are making money when people pay off your mortgage. also, wage increases over time make qualifying to buy easier, and the people at the top who are the actual buyers are getting much more than 5%/yr raises....

@davidpatrickgreen5319 8 ай бұрын

This is what all real estate agents sound like. They can always make a case that it's not only the best time to buy but also the best time to sell, lol. Never listen to someone who makes money on the transaction because the transaction is the only thing they care about and make money on. If you're going to use such a simplistic equation that fails to consider all hard costs, why bother at all? Do back of the napkin but at least include condo fees, property tax, insurance and one time assessment risk as these only go up and never go down, unlike mortgage interest rates.

@tjbro4816 Жыл бұрын

Maintenance fee $600 × 12 plus property tax $150 x 12 plus mortgage interest $1500 × 12 should be added on top of purchase cost of $600K. I AM NOT BUYING FOR SURE

@Carolinapetroska Жыл бұрын

Correct. Not worth the headaches with tenants either. There are thousands of condos up for rent now just downtown Toronto. Over supply. Regarding the potential 'capital gain appreciation' ; that remains to be seen. The best years of real estate in Canada are behind us. The government has ruined everything now with all the taxes and so on.... Better not to buy anything.

@PrimePropertiesTO Жыл бұрын

Youre missing the "back of the napkin" math part lol

@JR_55591 6 ай бұрын

People need to stop investing in housing. One house per family is enough! When you buy more houses you force families into the streets. I hope you guys realize this. What goes around comes around. Its Karma!

@wkevin4814 Жыл бұрын

No condo worth investing according to this logic

@davidpatrickgreen5319 8 ай бұрын

NO condo is an investment if it doesn't cover the carrying costs minus the amount you are paying down the mortgage. You can't rely on appreciation so if you are paying more for a condo that someone else lives in, you're either very generous or very foolish. Hmmn, sounds like what Toronto is trying to do. Give people housing that costs more than what it brings in.