Condo investors are still actively seeking investment opportunities in today’s real estate marketplace, but they’re analyzing deals digitally, doing virtual showings with their real estate agents, and performing due diligence before physically seeing condos to invest in.
I spoke with a new condo developer today and they had sold somewhere around 30 units in the past month — all virtually. Mind you, buying a pre-construction is a ‘virtual’ process to begin with, since you’re purchasing a condo based on a floor plan, you’ve never actually seen the unit (and never will until it’s completed), and you’re relying on the marketing materials, conceptual drawings and your perception about the project to help you decide whether to buy or not.
Today we’re going to explore 2 Adam Sellers Street, a newer condo built by Mattamy in Markham’s Cornell neighbourhood, located just off Bur Oak Avenue north of Highway 7.
For those of you familiar with Cornell, you’ll know that condos are rare in this area… for now. As demand for residential housing continues to surge, you’ll see more mid-density, low-rise condos supplement existing dense housing options such as stack townhouses and traditional townhouses.
This particular low rise condo is in high demand, from both a sales perspective and rental perspective, due to its strategic location. Sure, for many Toronto city dwellers, Cornell Markham may be in the middle of nowhere. But for Markham residents, Cornell is a high demand location.
Cornell has several well ranking public and Catholic schools in its neighbourhood. It is located near the Markham-Stouffville hospital (five minutes from my own home, and where my son was born). The new VIVA transit bus station on Highway 7 and 9th Line is being built in the area. It’s near several grocery stores including Longo’s, Garden Basket and Walmart. It’s an easy hop to the 407. And, overall, it’s a quite, safe, family-friendly neighbourhood with lush parks, forests, scenic views and just a good vibe to it.
But forget about all this “feel good” stuff — and let’s put our investor hats on. If you were to buy a condo at 2 Adam Sellers Street today, will it rent cash flow positively?
Let’s find out.
My recent investigation into sold condos at 2 Adam Sellers shows that one bedroom plus den condos are selling in the low $500k range. Two bedroom condos are selling in the high $500k range. And two bedroom plus den condos are in the mid $600k range.
For today’s analysis, we’re going to look at a one bedroom plus den, with one washroom, that sold for $525,000. Maintenance fee is $283.92, and property tax amounts to $1,118 for 2020 (this is an interim amount — meaning it’s going to be higher when you get the full year assessment).
Based on a 20% downpayment, here’s what your mortgage looks like:
Purchase price: $525,000
Downpayment: $105,000 (20%)
Mortgage loan: $420,000
Monthly payment: $1,991.69 (based on 3% amortized 25 years)
Property tax: $93.00
Your total monthly costs amount to $2,368.61.
Great — how much does a one plus den rent for at Adam Sellers?
A unit recently rented for $1,950.
So let’s do the math — a monthly cost of $2,368.61, less rent of $1,950, gives you a negative cashflow of $418.61… which is quite a bit for a condo.
In your first year, your principal amount is $11,457. $5,023.32 of that amount comes out of your pocket, meaning your tenant pays off only $6,433.68.
Hmmmm — something to think about.
If you had purchased this condo from the builder, chances are you’d be renting at cash flow positive — something we’ll explore in a later update.
But stay tuned for next week, where we’ll compare a townhouse investment in Cornell so you can compare how much cash flow you’ll earn (or spend) with a different housing option and attracting a different kind of tenant.