There are many forms of real estate investing. You can house hack, invest in a REIT, and purchase the physical property. However, two common pieces of real estate are condos and houses. Both have their pros and cons but which one is the better purchase in terms of investing. Is there an objectively better investment is it a per person investment. Meaning that it depends on the situation and the purchaser’s lifestyle. We will attempt to weigh out the pros and cons to see which one would be the better investment. There are many people who’re fans of one side and not the other. Everyone has their reasoning. However, we will analyze a few of these opinions or facts to see which one would average out with better results!
Without further ado, let’s take a look at which investment is better, a house or condominium.
At first glance, one might think that buying a house would be a better investment. However, many people don’t know what advantages come with owning a condominium. There are many advantages that can be lucrative for an investor in the long run. However, without proper knowledge of what makes a condo so lucrative, the average investor may miss out on such an opportunity. Let’s take a look at some positives.
One of the main attractions when looking to invest in a condo instead of a house is that it costs considerably less. This is for many reasons. First, you do not own the land you live on. Furthermore, a condo is quite a bit smaller. Condos can be hundreds to thousands of sq feet smaller than your average house. This drives prices down a considerable amount. However, you must consider the area in which your analyzing. Places like downtown Toronto will have more expensive condos relative to the house in a place like Windsor, Ontario.
As you can see, the average price of a condominium in Toronto was roughly $590,000. However, after a year, that price changed quite a bit because of the appreciation. This led them to shoot up to around $640,000! If you bought a condo in Toronto, chances are you made a considerable amount of money through the appreciation in your condo. See the full report by Trebhome.com here.
Now, We will take a look at the prices of houses in Toronto in Q2 of 2019.
The average price of houses within Q2 (April 1st – June 30th) is roughly $794,133. Therefore, condos, in the Toronto area were cheaper by over $150,000! At least in Q2. This means that condos are not only cheaper to buy but they cost less to maintain and live in.
It’s true, condos can be very convenient. One of the main things I love about condos is that there are no driveways to be shoveled or grass to be cut. The best part is that I’m not the only one who feels that way. There are always people who’re looking for that convenience in their life. Need a gym not far away? An elevator because stairs are too difficult? A condo has all of these and more.
It really depends on the area of the condo. However, some areas even have gymnasiums and tightly-knit communities. The demand for these things is high which means you should have very little trouble buying, selling and renting!
Maintenance for a condo compared to a house is very little. You have your monthly maintenance fee which can cost you hundreds of dollars. However, the frequency in which you’ll need to repair something is much.
For example, you could have rusted or damaged pipes in your house. This can cost thousands of dollars to fix. However, it’ll most likely be cheaper to fix in a condo and less likely to happen in general. This is the case with many maintenance and damage costs in a condo compared to your average house.
Another bonus is that you don’t have to maintain anything outside of your condo. This means no driveway fixing, and depreciation from landscape deteriorating or looking unappealing.
Although many people may not want to purchase a condo because of the ongoing maintenance fees, you have to remember that you’ll be paying less in mortgages, utility bills, and other fees. Therefore, you’ll still end up paying less on maintenance and repairs per year.
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Houses are a great investment. They can be lucrative, sustainable and used as a passive source of income. As many of you reading this probably know, there are many positives that are associated with owning and renting out a house. Therefore, we will take the time to look at why owning a house is a great option and compare it to a condo. Below is a video by Minority Mindset where he explains his point of view on investing in houses vs. condos!
With all investments, there is a risk. This is also true with houses. However, compared to owning a condo, houses have a relatively stable price range. Condos live within a highly volatile market. Therefore, it’s reasonable to believe that you’ll be taking on greater risk when buying a condo. Not to mention that you can’t offset this risk like you could with a house.
Houses tend to be affected less buy market fluctuations than condos. Furthermore, you have more opportunities to increase the value of your property as appose to a condo. This is definitely something to look into when deciding on which type of property to purchase.
When it comes to modifying your house, you’ll be met with far fewer restrictions than if you owned a condo. This is due to the fact that condominiums have codes or restrictions that residents must follow. These typically apply to all condos within the building. These rules vary between a condominium and you should always check the rules and seek any approval.
With a house, you usually do not need anyone’s approval. The only time you would need to inform someone is if you’re conducting a renovation that’ll affect your neighbor’s property. However, if you want to finish your basement and add 3 rooms, go right ahead. Need to renovate the kitchen? Knock yourself out. Change your driveway to interlock? No problem. All of these things can be done without someone looking over your shoulder. This is a huge advantage that houses have.
This is one of the biggest reasons why people purchase a house as an investment, upgrading. When you upgrade your home, you can increase its value dramatically. This can be done by modernizing the kitchen, fixing the landscape outside, the flooring, washrooms, and, last but not least, the basement. Doing upgrades can increase the value of your house by tens of thousands of dollars. Furthermore, having a nice looking house with plenty of upgrades can make it much more marketable. This means you’ll have less trouble finding a seller or even a tenant for your finished basement.
As previously mentioned, condos can’t be modified too much and are typically cheaper to maintain. This is where a house’s weakness can also be its greatest asset. The fact that you have the ability to modify, maintain and upgrade without restrictions means that you have more money in your pocket at the end of the day.
When it comes to rent potential, houses can be a huge opportunity for revenue. There are many different options when it comes to renting out a home. First, you can rent out the whole house. This is a bit less common. However, many people do it because they like having all of the space with fewer responsibilities. There is also the possibility of renting out your levels or even individual rooms! Renting out individual rooms is a good way to earn money through your house, especially if your property is near a university/college.
Another benefit is that you can live in one room while renting out the others. If you do this well enough and charge enough per roommate, you can potentially live for free. This is due to the fact that your expenses will be getting paid off by those who live in the house with you. Furthermore, you’re building equity in your house! It’s essentially a win-win situation.
This is a reason why so many long-term real estate investors love houses. They appreciate fast and you can make it pay for itself if you know how to do it. Of course, with a bunch of roommates, you can expect a higher degree of maintenance. However, considering the fact that your house is paying for itself, it is well worth it.
Christopher is just a man on a mission to help those around him gain financial success. Obsessed with writing about all things finance, this GTA native is constantly learning and sharing his experiences with others.