Keith Marshall
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Is buying property in Kitchener Waterloo a good idea?

Q&AAs a Realtor and a blogger I think it’s my job to answer questions about real estate. Gone are the bad old days where the sales person had most of the information (information is power) and the buyer just had to guess. Consumers and the general public expect to find the answers to their questions, not only when dealing with salespeople but before they deal with salespeople – when they are searching the Internet.

I like to get involved in the forums and social news aggregate sites, not only to put in my two cents worth, but also to see what kind of questions are on the minds of the general public. Often the advice and information on forums and social bookmarking sites is better than you can find anywhere else. This is crowd sourcing at its best. Here are a couple of recent examples.

 

Question: Is buying property in Waterloo a good investment?

I came across some pre sale condos in waterloo for sale and was wondering what you guys think about the idea? Knowing that this market is kinda saturated in Toronto, I wanted to know if this would be a good investment? Thanks

 

Answers: You have to run the numbers, consider your income, costs, rental market, time…etc.

As a GENERAL RULE…

Condos are not as good for investment purposes because the monthly fees eat into your rents, often are poorly managed and poorly built and can be difficult to find tenants willing to pay a premium for less space.

Every property for sale is different, there are good deals and bad deals, you need to learn how to discern one from the other.

Just remember, if you’re not making more than 6% Annual Return, there are likely better options for your money.

One thing I’ve noticed about Waterloo is the lack of mid-range rental options. There are lots of student houses that are &*!#, and some luxury rental options, but very few in the $700-$900 range per room. That might be a market to target.

 

Neighbourhoods, school, homesMore thoughts:

Many people think owning real estate is a form of passive income, IT ISN’T. If you want passive income put your money in mutual fund. You need to manage your tenants, this includes finding them, screening them, responding to their needs, maintenance, upkeep, cleaning the unit when they’re gone and repeating the process.

While great tenants make a Landlord’s life easy, bad tenants make it hell. You can find yourself at the Landlord Tenant Tribunal or cleaning up extensive damage caused by pets or any number of other considerations.

None of this is to dissuade you from going into real estate investments, just know what you might be getting into.

Get a good realtor, and a real estate lawyer who knows the Waterloo market. Too much money? Then you shouldn’t be a landlord.

 

Buying land (ie, not condos in high-rise buildings) has traditionally been a pretty good investment in Waterloo. The real estate bubble never really burst here. The city is very diversified, and seems relatively recession-proof. Even the RIM layoffs haven’t had much effect on housing prices.

Uptown is very trendy right now, and where you’ll see the highest increase in property values. However, the swampy ground in Uptown makes building new structures very difficult.

 

The city is very diversified, and seems relatively recession-proof. Even the RIM layoffs haven’t had much effect on housing prices.

I heard a statistic last year that if RIM disappeared & every square foot of their office space became for rent, we’d still have a lower commercial real estate vacancy rate than London and many other Canadian cities. I think we’re pretty lucky to live in such a robust area (at least those of us who were born here; the rest are just smart).

 

People who bought early in the Kaufman Lofts and Seagram Lofts made a killing. I think the newer buildings, that are not loft conversions and are at the higher end of the spectrum in terms of price, won’t increase in value as much.

 

I think early investors in Bauer Lofts did well too. But that was many years ago and now the condo market in KW is saturated, I think.  Buying something “freehold” is the best way to go.

 

Yes, and high rise condos have the worst condo fees, parking garages and elevators push them sky high.

 

I think buying a pre sale condo is a bad idea in the KW market. It took the Westmount Grand years to get started (as they waited for investors). City Centre Condo’s have cut a couple of floors off their first building; I wonder if they will even do a second building. Tanglewood was cancelled and Arrow lofts is taking forever. I’m sure there is more bad news too.

 

Bad bad investment. Too many high rises are going up in Waterloo, just a matter of time before the vacant tenancies start crashing land values.

More vertical housing has been built in waterloo in the last 5 years then any housing in the previous 15.

 

 

 Learn more about real estate and buying real estate.

Read: 365 Rules about Real Estate

 

 

Question: I’m thinking of buying a condo in the not too distant future. There are a lot of condos going up right now! I’m worried that if I buy, we’re going to see a big correction soon in housing prices. Housing prices in Canada have grown a lot faster than wages and I keep reading analysts who say the prices aren’t sustainable in the long run. Hmmm. I’m not an expert on this. Any thoughts on the Waterloo/Kitchener condo market?

Also… know of any good places?

 

Answers: Do the math of buying a condo vs. renting. The ‘affordability’ of buying has a lot to do with how long you stay (implication of real estate sales costs/taxes), and the impact of all the secondary holding costs (improvements, maintenance, condo fees/property taxes, etc). E.g. if you buy a condo and only stay for a month, renting would obviously be cheaper. On the other hand, if you stay for 5 years, you’ll often save money over renting.

Keith Marshall Kitchener Waterloo's RealtorYou need to do the math and model how much breathing room you have. I.e. run the numbers to see if in 5 years your condo value dropped 5%, would you still be ahead of renting? How much would it have to drop before you’re in worse shape than having rented? If you don’t think you’ll stay in your condo long enough to get ahead, don’t buy one.

It’s pretty easy to do condo vs. renting because a condo is pretty similar lifestyle wise to a nice apartment. Detached house vs. renting is somewhat harder because there’s usually a bigger lifestyle difference.

 

The NY Times has a great tool for calculating whether its better to rent or buy. Obviously there is some guesswork involved, but it lets you quickly check different scenarios (prices stay the same or go down etc…).

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

 

Neat tool. One thing to watch out for though – mortgage interest is tax deductible in the states but is not here. Using the first-time home buyer’s RRSP thing can also complicate matters. Generally speaking, though, the tool is good. Add a year to their estimate and you’re probably safe.

 

Growth higher than inflation in housing prices certainly isn’t sustainable in the long run. And the absurdly high prices for condos in downtown Toronto will, I think, come down due to so many coming onto the market. But here in KW, the central areas are becoming more attractive places to be with more jobs, more amenities, and better transit. If you’re thinking of buying in order to live there (rather than as an “investment”), I don’t see any reason not to do it. Housing prices in central, more walkable areas are increasing faster than are those in outlying suburban areas. They really shouldn’t keep going up, but even if housing prices go down in general, housing in central, walkable areas will be less affected.

 

Right now there aren’t many condo options in the uptown or downtown core. But as you mention I can think of a handful of new condo buildings that are going up that will even out the supply/demand. Something to keep in mind is once the LRT is up and running the property value of the condo (as long as it is on a line) will go up.

 

I bought a my Seagram loft 2 years ago and according to my property tax assessment the value of the property has risen by $20,000 and with the LRT I would expect that to rise.

 

If you’re within a few hundred metres of an LRT station your property values will rise (experts say by about 20%), but this won’t happen until the LRT is nearly completed. Your property tax assessment has gone up as MPAC is trying over the next two years to bring property assessments in line with market values. http://www.mpac.ca

 

I don’t think you’ll see a “big correction” but there is some downward pressure in the KW market. Currently we have a balanced market. I’ve been holding off on buying due to the RIM situation. RIM employs about 10k people in Waterloo and the housing market will face a lot of downward pressure if it goes under.

 

READ THIS: If you are interested in finding out more about Licensed Rentals 

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The answers above are all really good. If you have any comments or questions that require an answer from a Realtor, please feel free to email me keith@kwhomesandhouses.com or call 519.729.4116

 

Source

 

Read: The Marshall Report. (Kitchener-Cambridge top the list for Ontario investors)

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