If you’re in the market for buying an investment property, you would have thought about condos. They are more affordable than townhomes, semi-detached, or detached homes and easier to maintain. In recent times, there have been several developments outside the Greater Toronto Area. Some notable condominiums are being developed in Barrie, Hamilton, and the Niagara Region. If you live in the GTA and are planning to buy an investment property outside the area, you might have many questions. Continue reading and I hope to solve some of your doubts.
How much down payment will I need to purchase an investment condo?
For investment condos, you’ll need 20% as down payment and the remaining amount can be amortised for a 15 or 30-year period. The higher the down payment you make, the lower your monthly mortgage payment will be. You can put the condo on rent and direct the rental income towards your mortgage. In simple words, your tenant will pay your mortgage. There’s a huge demand for rental units, so finding a good tenant won’t be too difficult. Some tenants are getting into bidding wars over condos in Toronto.
What will I pay in taxes for a rental property?
When it comes to purchasing an investment condo outside GTA, you’ll be paying four kinds of taxes. Let’s take a look at them:
Land transfer tax
You’ll pay this tax at the time of purchase. For a $600,000 condo, you’ll pay $16,950 in land transfer tax. It is calculated using this model:
First $55,000 X 0.5%
On $55,000 to $250,000 X 1%
On $250,001 to $400,000 X 1.5%
Over $400,001 X 2.5% for properties that contain one or two single family residences
If you’re making rental income through the condo, you’ll pay income tax at the end of each financial year.
It differs from city to city and is included in your monthly mortgage payments.
Capital Gains tax
When the time comes and you choose to sell your investment condo, capital gains tax makes up to 50% of your profits.
Will I make a good return on my investment compared to downtown core condos?
Condos in downtown Toronto fare better condos outside the GTA. As offices open, people who moved away from the city to save money on rent and other expenses are coming back. Condo rent is going up and so are the prices. On the other hand, prices of condos outside GTA have stabilised and seen a slight decline. However, you need to remember real estate investments are long-term. Now’s the time to purchase an investment condo, put it up on rent, and when prices rise, you can sell it and make a decent profit.
Should I purchase older or newly constructed condos?
Each type of condo has its own set of pros and cons. While older condos are bigger in square footage, newer condos come with luxurious amenities and appliances with latest technology. If you’re buying a pre-construction condo, you can customise the flooring, finishes, and countertops. However, I would recommend purchasing an older condo with a decent floor plan, good construction, and desirable location.
For more details, connect with Brampton’s top realtor, Catherine Nacar today.