Investing These Days Is A Challenge . . . . . I Still Prefer Real Estate But Watch Out For A Market Correction


I haven’t been able to find what I call a “solid” investment for a couple of years now.   I’ve had some success with investing in the stock market but I don’t enjoy it at all!

I sell and the stock continues to go up, I’m unhappy.  I hold and the stock goes down, I’m unhappy.  I invest is conservative dividend stocks and they tumble.  I invest in gas and it bottoms out to around 50%!

At least I understand investing in condos and real estate in general.  This is the best advise that I can give anyone is to “invest only in what you understand“.   That implies not investing in things that you don’t understand!

When Toronto condos prices rose so quickly and poor quality condos dominated the condo scene, I pulled out and advised my global clients and readers to pull out.  The time to buy in any cyclical market (which condos definitely are) is after an

I still have investors looking to invest in Toronto and I find them reliable older condo buildings to invest in.

The room sizes are decidedly larger and there are no uncertainties.  The condo board is required to do Reserve Fund Studies, a Status Certificate showing the financial situation of the condo corporation is available for $1o0, you can walk the facilities, see everything before moving.

I was actually talking to a couple in Oakville the other day, that were considering a condo in downtown Toronto for their daughter.

Although the concept shows caring parents, the market shows that it is quite difficult to make the purchase of a downtown Toronto condo work, especially when you tenant is going to be a family member.

This gracious undertaking by parents though, is fraught with hazards.  First off Toronto’s over-priced over built condo market, in my professional opinion is overdue for a correction!

Whatever the adjustment, it will involve a price drop, which is understandable as today’s inflated pricing is simply out of line.

I like investing in real estate from two specific perspectives.  One, investing in your “principal residence” and having the mortgage paid off in full.  And, the second line of investing in condos is to wring out as much profit as possible.  This second alternative investment strategy is difficult when your tenant is going to be your son or daughter.

Optimally, I would recommend having the unit put into your child’s name (they must be 18 to enter into a contract in Ontario) but that introduces all sorts of variables based on each individual case.

It is probably best to put the unit in your name and designate the tenant as your son or daughter.  This way you will write-off all maintenance work and fees plus the mortgage interest.

My concern for them is more on the liquidity of investment as they would be buying into the market at a premium at a time when the market is due for a correction.

I recommended that look at existing condos instead of pursuing their plan of buying into a pre-construction condo.  They felt that “older condos have higher maintenance fees” and thus should be avoided.

I explained to them that the maintenance fees on pre-construction condos are always so out of whack, that they should at minimum be doubled for any accurate comparison to existing buildings.

I walked them through the case of Churchill Park Condos in Forest Hill where I owned a large unit with the nicest panorama of Toronto’s skyline that you can imagine!

You see, the budgets given to buyers by the developer were drawn up years before the condo ever went to market.  They are very flexible and fluid and it is not beyond any developer’s ethics to “fluff the figures” to make their offering more attractive.

Even when the numbers are accurate, they are based on “current dollar amounts“.  With the simple cost of living increases over the four or five years that it takes to sell and build the building, you can see how these numbers will fall short of meeting those future budgets.

The figures are locked in for one year under the Condo Act.  Included in the first year budget is a line item for an “Efficiency Audit” or “Technical Audit” and a “Reserve Fund Study“.  Reserve funds are derived from the allocation of a percentage of the maintenance fees “set aside for future repairs, and maintenance“.

The Reserve Fund Study legally imposes what the reserve fund must have in the way balances and with pre-construction condos in Toronto, as with Churchill Park Condo, it is always short of the required funds.  In the case of Churchill Park monthly maintenance fees had to be increase 100% over the first three years!

You’ve got to know which existing condos are the good ones and which are the bad ones or again you are just throwing darts at a board!  How do you optimize your investment return potential?

You register with me as I know all of the buildings in Toronto and can definitely navigate your investment strategy with you to include only the best ones.

I’m Charles

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