When condos were originally becoming a phenomenon in Toronto rising all over the place, in the late 1980s, I was fascinated by this relatively new housing form. They were much talked about and quite popular until the day came that they had oversaturated the market.… for the time being, anyway.
Skip ahead about 25 years, and I made my first investment in this genre after owning many properties and building several houses in central Toronto.
The Appeal of Older Toronto Condos
I was drawn to older condo buildings (1980s – 1990s) due to the space one could get at a low price per square foot. The layouts were decent, as well, and the buildings had certain characteristics that suggested a better neighbourhood within… sort of like residential neighbourhoods.
These buildings, themselves, are neighbourhoods, and some have shown high levels of owner pride and permanence of residency. A lot of the newer buildings, flashy and attractive as they may be, contain many tiny units that have been snapped up by investors and rented out, thus diminishing much neighbourhood character potential within the building.
Oftentimes, there isn’t even a resident condo board, showing the buildings don’t get a daily eye cast towards proper appearance and maintenance. These properties rely simply on a small group of owners, often ones that don’t live there, who hire engineering firms to perform periodic maintenance reviews. There aren’t strict eyes to ensure that regulations within the building are adhered-to — these are initially set in place when a condo corporation is set up in a new building to keep these edifices in tip-top shape, protecting the investments of the unit owners.
One needs to note that ownership extends beyond one’s own unit, and comprises part of the whole entity, also referred to as strata. Under this strata arrangement, owners own their individual units, or lots, while also collectively owning the common property and assets as a corporation, which includes the hallways, lobbies, parking areas and exterior of the building among other things. All of this needs attentive review or it can quickly fall into decline.
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Are Older Condos Better than Newer Condos in Toronto?
My personal investments in real estate shifted partially into condos over a decade ago, and it’s been a constant source of interest and analysis for me to check out different buildings to ascertain where I could achieve the greatest potential returns with what I do.
There are definitely some great new buildings, but there are plenty of superlative older ones. Recently, noting that some of the taller landmark buildings built over the past decade had not been getting the love that people had originally expected, I decided to compare the average returns per square foot in recent years and over the last decade in a group of older buildings versus a group of newer buildings.
I found was that the numbers were very similar, though there were certain newer buildings that performed poorly compared to the rest; these were often ones comprising mostly smaller units owned by non-resident investors, which negatively affected the values of some of the upper-level, larger units in those particular buildings.
Keep reading to learn more about Toronto’s unique real estate market:
- Don’t Be Unduly Swayed by Glitzy Condorama
- What Homebuyers Need to Know About Toronto’s Distinct Architectural Style
The Popularity of Older Condos is On the Rise
More and more people have been prospecting in the older condo buildings, buying outdated units and renovating them with different degrees of success. It’s sometimes simpler and less costly than doing the same with freehold houses, though contractors find it more difficult costly to work in them.
Several renovations have simply been cosmetic improvements, for the most part, and didn’t attract substantial returns. I find the same financial scenario holds true for many houses that are given a simple-minded, quick and cheap renovation, rather than a fully considered rethinking and complete rework.
After all, renovation should incorporate more than just finishes, it should also adapt new ideas to dwellings, and condos often do have flexibility in the way they can be replanned and reworked.
Key Features of Older Condo Buildings in Toronto
Many of the older buildings are lower rise, therefore, they occupy a greater amount of land per unit… which, in the future, could translate to a greater valuation of each owner’s share of the strata, if someone were to offer to buy up all the unit holders’ properties, and the land below them.
Although this scenario has not often occurred, to date, it could be something to consider about down the road. Better, still, is that these older buildings are not shoehorned onto postage stamp sized lots in the city’s core, only to have other tall buildings erected almost directly in front of them, obscuring views and sunlight that may have once been an attraction when buying there in the first place.
There are some prime examples, not just in the downtown core, but even in Yorkville, where three towers are so close together, that the units barely oversee anything other than what the people in the neighbouring buildings are doing. In the long run, this could not possibly bode well for the value of one’s investment.
ROI Considerations when Purchasing a Toronto Condo
Whether an investor borrows money or uses their own cash to buy a condo can affect their returns, if they are improving a unit to resell over a shorter period of time.
Even with current elevated interest rates, it can still be beneficial to borrow money if the return on capital exceeds the interest rate on a loan. One caveat with some older buildings are the condo fees. These must be scrutinized to see what’s included in comparison to a newer building.
In several buildings these fees include all utilities, which is exceptional, plus some of the older buildings have 24-hour concierge and other services that newer buildings don’t. Other buildings, one will find when reviewing reserve fund studies outlined in status certificates (before one buys a unit), that there may be several planned condo fee increases over following years.
Some other buildings are smaller, and, as a result, have higher fees due to the upkeep of a whole building spread amongst fewer owners. For some buyers, this is a big plus since these types of buildings are often perceived as “boutique” buildings, with fewer units per floor and often less than 100 units in all. They can often foster very strong residential communities within.
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My Results
Personally, as I mentioned earlier, I believe that a renovation should be complete and give a brand new life to something, and I have always completely re-planned units that I have owned with compelling results!
Consistently, when I have sold these, they have surpassed any previous per-square-foot value of any units sold in those particular buildings. Ever. As a recent example, one of my renovated units exceeded any other sale in that building by nearly $300 per square foot, and my costs allowed for a generous return on investment.
The unit had an unencumbered view with no future risk of being compromised, was finished with engineered walnut floors, contemporary and timeless Italian-made custom millwork, and was replanned in a way that used the square-footage productively.
There were downsides, however, such as and 8-foot ceiling, no exclusive outdoor space and pets were not allowed. Regardless, it sold for as much or more per square foot than units in much newer buildings nearby. Historically, I have been able to exceed the previous maximum square-footage values of other units sold in those buildings by anywhere from 15 to 30%. Some of these unit numbers have not been seen since, in those buildings!
With every acquisition, I sought out special elements and qualities that not all other condo suites, or buildings, possessed. I looked for ones that had a sense of community within the buildings, with higher owner-occupancy; some suites had large outdoor terraces with nothing above them; location was important, close to things to do, amenities, transit and possessing great walk scores; orientation to sunlight and assured unobscured views was paramount; some suites were penthouses, corner units or in boutique buildings.
There was always something great that set them apart.
What Buyers Need to Know About Toronto Condos
I have been watchful of what other people have been doing with their condominiums, remarking how some were excellent, and most others were mediocre. Buyers are generally savvy, and, while it may sometimes take a lot of cajoling to get someone to shift their focus towards older buildings versus newer ones, the rewards of opening up their searches can be very rewarding in many ways.
Older condo buildings often have renovated lobbies and elevators and feel just as fresh and opulent as some of the newer ones. While often lacking ceiling heights, they possess a greater durability, and strong communities.
The materials used in the initial construction were often better and not prone to failure over a period of 10 years, as I have noticed has been happening with a lot of newer buildings. Upon reviewing a status certificate prior to firming up an offer on a newer condo for a client, I noticed that there had been an assessment levied upon every unit holder in the building in order to maintain the fees around current amounts, but pay out the cost of the replacement of a pair of elevators that were not even eight years old… that was a half a million dollars shared amongst the unit holders in that building.
We ensured that this levy would be paid by the current owner and not by my client. I have seen buildings where installation issues with the curtain wall systems (steel and glass exteriors) have continued well beyond initial occupancy of the building, and lawsuits filed against the builders by the unit owners, five years down the road…
There are several of these types of nightmares and battles being fought in newer buildings, due to fast construction and cheaper finishes sourced from abroad.
Learn more about my buying process right here.
Reasons to Work with a Toronto Real Estate Agent who Loves Older Condos
Over recent years, I have been creating a floor-plan database of units in nearly 300 buildings, and often enjoy studying these plans to figure out how these units could be improved.
In fact, when I’m looking at condominiums with my clients, if there aren’t any floor plans provided by the listing realtor, I can often pull one up from my database, to investigate what potential there may be in a unit, where walls could possibly be relocated, and where things could be moved to improve the functionality and layout of the units.
From all of this, it’s apparent that there’s a lot to consider, but mostly that older condo buildings deserve a lot of love and consideration. Just like residential neighbourhoods in the city, many older ones are more solid places to live and offer establishment, convenience and space. I’m more than happy to share my personal expertise in multi-unit residential buildings, and can assist in an educated and calculated assessment of what could be the best home investment for you.
Are you looking for Toronto real estate advice? Reach out directly by calling 416-824-1242, emailing robert@lifeofluxury.ca, or filling out the form on this page.
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