What You Need To Know Before Investing In A Condo

As you drive east on Gardiner towards downtown Toronto, you enter a jungle of tall and shiny glass condos. Hundreds and thousands of people live in each of these condos, short for “condominium”, forming an intricate ecosystem. The province of Ontario is home to 900,000 condo units and over 11,000 condo corporations, with each complex forming an intricate ecosystem of hundreds and thousands of residents and professionals to support them. Investing in these communities can be empowering, allowing you to run a small business to provide a home for someone else. Unfortunately, we seldom discuss the downsides of condo investing, especially its non-financial risks, that could make your investing journey stressful. Greater due diligence needs to be carried out with the following in mind:

First of all, what’s a condominium?

  • Condominium ownership allows for private ownership of individual dwelling units within multi-residential properties while sharing title to the land and common elements (such as elevators, garbage chutes, party rooms and communal gardens) of the condo community. In other words, condos are more than shiny 40-storey glass apartment buildings on Yonge Street!
  • As a condo owner, you become responsible for paying your share of the condo community’s maintenance expenses, complying with the condo corporation’s governing documents, and participating in condo governance by, for example, voting for directors.

 

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The province of Ontario is home to 900,000 condo units and over 11,000 condo corporations. Photo by Zia Syed.

Navigating condo bylaws

  • Renovations and repairs. Condo boards have a published list of repairs and renovations that are permitted and require permission. Extensive work like bathroom renovations may require you to present your contractor’s credentials to the condo board. Before and after the work, you may need an inspection by your condo staff to ensure the quality of work completed. Every time you buy furniture or appliances, you may need to book an elevator with certified cheques for deposit.

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Challenges with neighbours

    • Lack of privacy. Have you ever waited for the elevator with a group of intoxicated Airbnb guests? How about your next-door neighbour drilling and hammering during prohibited times, or their kids jumping and screaming as you work from home? If your condo is on a busy street, prepare your earplugs for ambulances, firetrucks, and loud car exhausts. If you’re surrounded by tall buildings, watch out for creeps with binoculars. 
  • Occasional inconvenience. A fire alarm may require the whole building to vacate, only for you to discover that it was your neighbour cooking. Toilet from the unit above flooded, and now your ceiling is leaking with mold growing. Odours from your neighbours’ cooking and smoking are now entrenched in your building hallways. 
  • Short-term rentals. Although not all condos permit short-term rentals, they could be a great nuisance to the residents of the buildings abundant in Airbnbs. Compared to the owners or long-term tenants, short-term guests are less motivated to treat the condo amenities with care. With higher density of short-term rentals in buildings, close to nightlight especially, there’s an increased likelihood of noise, fights, overcrowding and even shooting
  • Commercial neighbours. Don’t be surprised if you smell grease if you live right above a fast food retail. Or the loud music, thumping bass, and sound vibrations from a nightclub that just opened up in your building. Proximity to dumpsters on lower floors will result in a lot of resident and garbage truck noises.
  • Pest infestation. Pests could move in with travelling residents, usually from their belongings or pets themselves. These pests then crawl through tiny rips, unsealed gaps, and vents, invading other units. Littering and improper garbage disposal attracts these undesirable creatures as well.

“Some Short Term renters next door decided to shoot through the wall in my apartment last night”. Photo by Lucas Timmons.

Unsatisfactory building management

    • Customer service. Don’t rule out dealing with lost or stolen packages. There may be delays with the condo manager approving your rental applications, or confirming the party room booking for your upcoming birthday. The condo staff may forget to provide you reasonable notice for unit entry, with them knocking on your door during your sleep after a late night.
  • Security. Burglars can fool the security guards by posing as delivery men, or gain key access by booking an Airbnb in your building. Some residents get frightened by the homeless sleeping and taking drugs in the building staircase. Security guards can be poorly trained, inattentive or irresponsible at times, letting people in without registering their names and vehicles. Some complexes lack security features such as CCTVs or security locks.
  • Building quality. Irregular flooring, lamination gaps, water leaks, poor insulation, broken garbage chutes, inferior substitutions, and glass panels falling down are just some of the deficiencies condo owners have to deal with. And what’s worse is that most condo owners are reluctant to make a fuss about their poorly built properties for fear of lowering asset values until they offload their unit. 
  • Parking. Many new condos in both suburbs and downtown have limited visitor parking, which can be abused by guests and make it more difficult for your family and friends to visit you. You may sometimes find your parking spot occupied by confused visitors. Driving up and down to P4 for your daily commute can be nauseating. 
  • Maintenance fees. These cover your snow shovelling, elevator repairs, hallway cleaning, and other responsibilities to operate your community. However, high condo maintenance fees may not be worth it if you’re travelling all the time and can’t take advantage of your building amenities. Unlike for freehold properties, you also don’t have the flexibility in delaying repairs or finding cheaper contractors for condos.
  • Special assessments. A special assessment is an additional fee assessed on each owner for a special project, like repaving the parking lot or installing a new roof. If there isn’t enough money in the reserve fund and an unexpected expense crops up, the condo board will vote to levy a special assessment on all homeowners. No matter where you’re in Canada, you should be careful about who you select as your board of director and the property manager for your condo complex to ensure it always operates with financial stability.

All of the above isn’t meant to be fear-mongering for future condo investors. In fact, we want landlords all across Canada to continue investing in condos to increase housing options for tenants with millions of newcomers expected in this country over the next couple of years. However, as condo purchases involve significant sums of capital, we want you to be well-informed for worst-case scenarios. If you don’t have the time or energy for all of these, check out Tolobi’s Property Management Concierge service for a hassle-free approach to managing your property. With our team of experienced, client-focused, and trustworthy professionals, we offer comprehensive tenant placement and property management services in Canada catered to your needs. 

Disclaimer: 

The information contained in this blog is provided for informational purposes only and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this blog without seeking legal or other professional advice. Laws frequently change, and this blog might not be updated at the time of your reading.

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