by: Linda Pinizzotto, Realtor & Founder President CEO Condo Owners Association
If you are buying a condominium, you have to know how condos work not only in the new condo market but on the resale market as well.
The new condo market is known to sell their units on a price per square foot basis with additional premiums on the floor of the building. There is also added costs for lockers and parking. Buyers hope that the value of the unit at the time of purchase is expected to rise by the time the building is completed approx. 2-3 years later and following occupancy and registration stages. Sometimes the increase hasn’t shown enough profit to cover the costs of reselling the unit after registration of the building considering a double Land Transfer Tax (if the unit is in Toronto), the legal and closing costs plus the real estate commissions and HST for services. Know what you are doing before you sign on the dotted line. Contact Linda Pinizzotto
In these cases; many Buyers may buy time by renting their unit until the value increases enough to cover the costs and provide them with a profit. However, if it is an investor they have to pay the full cost of HST on the purchase price at the time of final closing and if the occupancy period was 5 months, it is highly possible there may not have been any income received and the unit was vacant during this period. While you add all of these costs, the window for profits tighten. On the other side of the resale market condominium; it is common to see a lower price per square foot. There is also a large influence on unit value depending on the maintenance fee.
There are many condominiums where 1200 sq feet units sell for only $200,000 however their maintenance fee is $850.00 per month. In these cases, the value of the building has taken a drop in price because the maintenance fee has increased too much. Another negative impact would be the reserve fund. Some buildings are sitting tight with over a million dollars in reserve funds yet others have depleted reserve fund and/or extremely low with potential special assessment on all unit owners. Real Estate is suppose to be a sound investment and a long term shelter for Ontarians to have equity as they pay down their mortgages and hope to realize more value in their property.