Building a home from scratch takes time and effort which most people don’t have to spare. Investors are usually busy looking for money-making opportunities and one area that continues to draw their interest in real estate. Condos and townhomes are very popular today in the real estate market. Most people are looking to live with a community instead of staying isolated in a stand-alone apartment. Investors particularly look for opportunities to put their money in these types of shared-wall housing.
Townhomes Vs Condos
The difference between townhouses and condos is in the mode of ownership. If you own a townhome, you own the building and the land around the premises while a condo is limited to your condo unit. You only have a claim to your living space but every other part of the building and premises is shared.
We need to highlight the difference between these types of buildings because it would help you decide which one to invest in. What makes them alike, however, is that both condos and townhomes are good home options.
When you invest in these properties, you get the same benefit as you would in a detached house. Condos have a more complicated side for investors because they are usually governed by the homeowner associations. This does not in any way prevent you from making money from them.
Major Ways To Make Money From Condos and Townhomes
If you plan on investing your money in any of these properties, you can make a profit from it. The best part is there are lots of condos and townhomes available in Toronto where you can invest in. One area you need to look at when investing is location. If you buy properties in remote areas, you will be getting profit in the future. There are two major ways you can make money from condos and townhomes, they are capital appreciation and rental income.
This way when you buy a property, you can resell it for a higher amount than the amount you purchased it. This is the type of investment most people get into when they buy pre-construction condos. When the building project is completed, they get higher returns from reselling the property.
You can also make money from letting out your condo or townhouse. This is for people who want a regular cash flow coming in from their investments. The way you can begin to make a profit after you have recovered the money from purchasing the property.
Rent increases as the value of the property increases within the environment. That’s why big cities such as Milan, New York, Dubai, and Toronto have some of the most expensive rental rates in the world. With that in mind, if you plan to rent out a condo or townhome, it would be wise to invest in properties somewhere that’s not fully urbanized yet. In Ontario, Canada, townhouses located in the Whitby area are much cheaper than those in Toronto. But since developments are constant in the town, rent prices will only increase in the coming years, so it’s good to invest now while the property cost is lower.
More Tips to Make Money on Townhomes and Condos
- Analyze The Operating Costs
Before you go ahead to make any investment in a real estate property, you should consider the costs involved. We recommend that you get tax reassessment and see if you can reduce operating costs on the property. You can also negotiate for lower rates when it comes to spending on maintenance and repairs on the property. You also need to consider other associated costs like advertising and other services you may outsource. When the operating costs of the property are low, it increases the value of the property. The essence of investing is to get profit. You lose money when the property continues to add to your expenses.
- Calculate Capital Appreciation Rate
If you plan on reselling the property after purchase, you should analyze the initial cost of the property and estimate its potential value in the immediate future. This way you can tell if the condo or townhouse is worth investing in. You can calculate the capital appreciation rate by dividing the value of the property by the net income. The resulting amount should then be deducted from the operating costs. This way you get the actual capitalization rate. You should also factor in other arising matters like rent reduction and rent increase when calculating your operating costs. You can subtract the operating costs from the capitalization rate to get the actual value of the property when these changes occur. This way you know how much profit you will make when you eventually sell or if it would be more profitable to put the property on rent.
- Work With A Professional
The only way you can be sure that you are making the right investment decision is by seeking advice from professionals. Before you invest in any townhome or condo, you should hire a real estate agent to help with analyzing the market. It is from their analysis that you can get the real value of the property. You will also know from your real estate agent, the rent value of the condo or townhouse. You can then estimate your operating costs which will include the homeowner association fees in the case of condos and other expenses such as taxes, repairs, management fees, mortgage payments, and insurance premiums.
- Analyze the Condo and Townhomes Market
Another tip that will help in your investment decision is knowing which type of properties leave the market quickly. If you are buying a property in an area where people rush to rent condos, you may find it difficult to make a profit from your investment. The longer it takes to get your property rented, the more you spend on operational costs. Also, properties that are not in demand will be in the market for a lesser value. Quick selling rental properties appreciate better and you will make more profit.