What to Know Before Investing in Luxury Condos: 4 Tips For Better Investments

What to Know About Investing in Luxury Condos

One of the most exciting real estate markets in North America is the one for luxury condos in cities throughout Canada. Investing in luxury condos can be a bit different than in single-family homes. Understanding how luxury condos differ from other options can help investors and homebuyers make the best choices for their personal needs. It can also mean recognizing opportunities before other investors and snatching the best deals. 

What Is a Luxury Condo?

Looking over different property types, it can sometimes be hard to tell what distinguishes one type from another. What puts a condo into the luxury category?

One of the first and most obvious criteria is price. Some experts consider properties within a specific dollar amount to be luxury. Others go with percentages when considering whether a unit is viewed as a luxury one—to some, luxury condos have a price tag within the top 10 percent of housing prices in an area. Other experts put units that sell for around twice the average price in a given area luxury units.

Amenities are also a huge part of the luxury package. High-end materials, such as polished granite, marble, or hardwood, will be used within the unit. Appliances will be top-of-the-line. Fixtures in bathrooms and kitchens will be posh updates over the usual.

Luxurious condo amenities are common in shared areas. These can include:

  • High-end workout facilities
  • Pools and saunas
  • Plush landscaping
  • Outdoor amenities such as rooftop lounges or firepits on the property

What Do You Own When You Buy a Luxury Condo?

Luxury Condo Owners Should Know What Comes With Their Condo

Buying a condo is a little different than buying a single-family home, so there are some important things to know about condo ownership. Buyers essentially own a share of the building, grounds, and everything inside their unit. You may see ownership of the property described as an "interest" in the property. This means that every unit owner technically also owns a share of common elements and common areas of the condo building.

Buyers should review the property covenant to see what features are considered part of an individual condo and part of the common areas. For instance, different properties have different rules regarding whether interior walls are considered entirely part of the particular unit. Some consider the entire wall the condo owner's responsibility. Others think surface paint and drywall are part of the unit, but interior parts are common elements that are the condo association's responsibility.

These are all important to know about in advance because they will govern the individual owner's maintenance obligations.

Investing in Pre-Sale Condos

Pre-sale condos are not yet occupied; in many cases, individual investors can buy before construction begins. There are many advantages to buying new construction homes, and pre-sale condos are no exception. Pre-sale condos offer great opportunities to investors who have researched and can identify a good prospect.

Buying at the pre-sale stage means that you can choose based on the developer. Look for those with a strong reputation for creating quality luxury dwellings. How happy were buyers with previous offerings from this developer? Did the units tend to go up in price over time? How were the maintenance fees, and did buyers like the services and amenities they received?

Getting information about closing and development fees before investing is vital. These can vary wildly, so get all the data in writing. Development fees are charged to a builder to offset the impact of rising population density in a neighbourhood. This fee is, in turn, passed on to the buyers. A lawyer and a skilled pre-construction realtor can help you determine what to expect and what fees are fair.

Renting Out Your Luxury Condo

Once you own the unit, what is your plan to make money on this investment? Some investors buy with the intention of selling the luxury condo at a profit. In other cases, renting the unit out for ongoing income can make more sense.

Rentals can be done on either a short-term or long-term basis. Look into local laws to see what sorts of rental terms are allowed. For instance, many areas have strict rules about renting properties out at night, and some prohibit the practice altogether. In these areas, minimum rental times, such as rentals by the month, may be required.

In some cases, only long-term leases are permitted. These have both benefits in drawbacks. While the profits may be lower than a short-term rental, a year-long lease has fewer associated risks. Plus, fewer occupants over time mean fewer chances of a bad tenant.

Research the individual condo building's rules to see if they align with your plans for renting out your new unit.

The Luxury Investment Adventure

Every investment is different, and every investor has their own unique set of criteria and wants. What is your price range? Should you buy a condo or a single-family house? Take some time to research builders, fees, rules, and requirements to see if a luxury condo investment is for you. Doing your due diligence ensures you get the best deal possible and the best return.

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