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Condominium Units in Kitchener-Waterloo
Owning a condominium is slightly different than your typical home ownership. When you buy a condo, you’re not just buying a property, you’re actually buying into what is called a condominium corporation. Wait, a corporation? Exactly, a corporation. When most people think of corporations, they typically think of massive businesses with multiple stakeholders. Condominiums are actually not that much different. They are an organization with multiple stakeholders, exactly like any other corporate body. While the common idea of a corporation is that of a large business that produces a range of products, you can think of a condo corporation as a business whose main responsibility is maintaining the building (or buildings) its residents live in. When you buy a condo, you buy into the organization that maintains your property.
The primary difference between owning a condo and owning any other kind of real estate boils down to the maintenance costs. Owning real estate can be seen as an investment, even if it’s just your home and not a property you are renting out. When you buy a house, for example, you are making a commitment to owning and maintaining that property. This includes making the mortgage payments for the duration of the term, but also extends to any kind of maintenance and upgrades you might decide to do on your property. At the end of the day, once the mortgage is paid off, you are the rightful owner of that property and all the benefits that come with it.
Now, as with owning any other kind of capital, depreciation is always a factor to be weary of. Depreciation is part of the normal life cycle of capital. This is to say that everything needs maintenance. If you own a car, you need to maintain it. If you own a computer, you need to maintain that as well. If you own any kind of machinery or production line, you definitely need to maintain it. Owning a house is not at all different. It’s not sufficient to just make mortgage payments. You will also need to keep up with the upkeep of your property. Even more so, it’s recommended that you think ahead and perform upgrades and renovations at certain intervals. This ensures that your home, as an investment, is well maintained and does not fall behind in price relative to other properties. When you buy a home, this is part of your commitment as a homeowner, no exceptions.
When you own a condominium, all of the same rules of capital ownership apply. However, there are some differences in how the maintenance costs are tackled. First and foremost, what sets condominiums apart from detached homes is the existence of common elements or common amenities. Typically, a condo will be a unit in an apartment building. On some occasions as well, it can also be a detached home that is part of a complex with common elements (such as the roads within the subdivision). The existence of these common elements makes it so that maintenance costs need to be administered differently. This is why condominium corporations exist. Their sole purpose is to manage maintenance costs as effectively as possible for the benefit of their residents. This starts at the common elements, but definitely does not stop there. Condo corporations also take care of unit-specific maintenance issues, making sure that the entirety of the building or complex is in peak condition for its residents. This carries a number of advantages because it allows residents the freedom of not having to worry about tasks and chores pertaining to the property. On a detached home you would have to do an assortment of tasks, from mowing the lawn, to shoveling snow, to maintaining the building inside and outside. When you are part of a condo corporation, the organization takes care of the details for you.
The main deterrent for condos a lot of the time are the condo fees associated. This makes a lot of sense, especially given that they could be quite pricey. However, you do need to put it into context. When you own your own home, you don’t just take in the benefits, you take in all of the associated risks and liabilities. This means that you are responsible for the maintenance and natural deterioration of your home (or your asset) for as long as you own it. If you make the mistake of neglecting it, you will definitely feel the cost both in terms of the property’s functionality, as well as its price when it comes time to sell. Not only that, but you need to pay a price both in dollars as well as hours. As a sole home owner, you both bare the costs of maintenance as well as the commitment to put in the hours of labour for that maintenance. Once you add everything up, condo fees do start to make a bit of sense.
From a slightly more positive perspective, it isn’t just about the maintenance and deterioration. The great thing about condos is that they provide an assortment of amenities which would otherwise be difficult or impossible to obtain for sole homeowners. Condos have perks such as gyms, and swimming pools, or even quite extravagant amenities such as golf courses, tennis courts, and marinas (for ocean or lake front properties). These are made possible only by the fact that multiple owners come together to live within the same community.
The condo corporation then forms the administrative structure required to manage and maintain the building or complex on behalf of its residents. At the same time, condo residents benefit from great savings on a very important resource: time. By joining a condo corporation, you can sit back and enjoy your property without any of the hassle. Similar to tenants that lease or rent a property, you can always depend on the administration to make sure everything is up to spec. This makes it very convenient to be part of such communities. However, unlike renting a property, you get the full benefit of ownership along with all of the accrued equity of your real estate investment. Simply put, it’s the best of both worlds. You have an administrative body taking care of your unit, while also making sure that the money you spend on paying off your property remains as equity that you own. Win win!
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The Condo Market in Kitchener-Waterloo
The condo market in Kitchener-Waterloo has been stirring up quite a bit of excitement, and for good reason! Along with the city’s natural growth and expansion, we are seeing a lot of different demographics taking interest in the downtown and uptown cores. This is coming from different directions, but they all seem to be converging onto one destination: big shiny condos.
Let’s take a closer look at what is going on. Kitchener-Waterloo is expanding now more than ever, which is exciting news for our (formerly) little town. The city is boasting strong developments in the technology and educational sectors, which is attracting more and more enthusiasm. The interesting thing about the so called technological sector (as well as the prestigious universities that stand by it) is that it can be quite a unique resource. What exactly makes Kitchener-Waterloo such a “tech town”? While most industries can be defined by “fixed” criteria such as factories, location, proximity to a specific natural resource, and so on, the technologically inclined centres are a bit different. The resource resides in the people as well as the culture that emerges from them. The tech sector is about intellectual capital. This means it’s not quite tangible, but rather resides in the collective knowledge, spirit and ambition of the community in our proud city.
What does that have to do with condo developments? Quite a bit! Condo developments play into this phenomenon both in terms of real estate as well as from a community perspective. Let’s take a look at the real estate first. We are seeing two major hot spots in Kitchener-Waterloo, the Downtown Kitchener area as well as the Uptown and University area in Waterloo. High-rise condos are the best way to accommodate a large number of people within the downtown and uptown areas, close to all of the amenities including the universities and the many tech companies that people work at. Because land is more scarce at the core of any city than it would be in the outskirts, high-rises make a lot of sense as a form of development. At the same time, it’s not just about accommodating current residents, but also being ready for future waves of people to come. Indeed, Kitchener-Waterloo is very much growing in popularity, attracting the attention of businesses, employees, entrepreneurs, and consumers alike. This creates a gravity around the two cores, which explains the growing interest in these condo developments. If we think of it from a supply versus demand perspective, we can clearly see why condos are going up in price, and why that is met with excitement from investors who want to either rent or re-sell the units. Long story short, many people want to be close to either downtown or uptown, and for good reason. Developers, investors, and real estate agents alike are rising to the opportunity to satisfy this demand. However, even so, we are seeing a lot of competition as people are bidding to get into condo ownership one way or another.
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This buzz is fueled even further by the culture and community condos may promise. Looking beyond the speculation and the supply versus demand, there are some aspects here that really speak to consumers. It all comes down to the lifestyle. When you buy into the condo, you buy into the community that your unit is part of, and for many people that means quite a lot. It means that you can be within walking distance of your workplace or your school. It means that you are always within reach of your city’s amenities. It means that a metropolitan lifestyle is at your fingertips, which can be quite the luxury. Even more so, some condos boast the benefits of their internal community, positioning themselves as tightly knit “neighbourhoods” in a similar manner to the typical picturesque suburb (it’s just that it’s all in one building as opposed to a whole block, for example). All of these aspects can enrich one’s lifestyle, adding significantly to their experience as residents.
That being said, there is no surprise to see people flocking to these developments, and it’s not just the tech people. In fact, there are many demographics that are attracted to the lifestyle and culture offered by condos. This includes older demographics who are downsizing (such as baby boomers and as well as “empty nesters”), first time home buyers (typically attracted by the convenience of the lifestyle), young professionals who seek a cultured and metropolitan lifestyle, and even people coming in from surrounding cities (usually from the Greater Toronto Area seeking friendlier prices for downtown lifestyles).
Taking into account all of the above, it really does make sense why condos seem to be such a hot commodity in the Kitchener-Waterloo market. The numbers are enticing, and so is the lifestyle it promises. The city is rapidly growing and there are many exciting things to look forward to. Why not jump in? Many people agree that it’s a good time to jump in. However, there are a few things we should all be careful with, namely the speculation. While the consensus is indeed that the condo developments are great for the city and its residents, we do have have to be careful when it comes to purchasing condos for investment purposes. It is certainly a sound choice, however, people do tend to become overly excited about these kinds of markets. This can be detrimental because, if too much commotion is generated, it might bring up the price for these units beyond their reasonable boundaries as overly enthusiastic people engage in bidding wars. In the long run, it can create hyperinflated prices and can leave investors disappointed in their returns down the road (in addition to disappointed residents who were forced out of the market by bloated prices).
Now, this is not at all to discourage people from the condo market. In truth, there are only good things that can be said about these exciting developments. Investors, residents, businesses, and the city itself all stand to benefit from what is to come, so there is no reason to shy away. However, we do need to be wise about it, and the moral of the story is that we need to be level headed in our decisions. As an investor, you can’t go in thinking of this as a get-rich-quick scheme. The market is growing rapidly, but if you don’t have realistic expectations regarding your return, you might be disappointed. As a prospective owner or renter, you can’t go in just to follow the trends. If you don’t do your homework and make sure this fits your budget and your lifestyle, you might have difficulties down the line. At the end of the day, just like with any other market, it’s in our hands to make sure we handle this wisely and make the best of it. There is a lot to gain for everyone, but only if we are being smart about it.
Considerations When Buying a Condo
There are many considerations that go into buying a condo. First and foremost you have to decide, is a condo the right fit for you? As we’ve discussed above, owning a condo is a bit different than your typical home ownership. When you buy a condo, you are buying into a condo corporation and are essentially becoming part of both a community as well as the administrative organization that keeps it together.
Price and Condo Fees
As with any purchase, the best place to start is by looking at the price. Condos are great because they feature a relatively lower price point than detached homes. This makes them particularly attractive for first time buyers, young professionals, homeowners looking to downsize, and many others. The caveat to be aware of, however, involves the condo fees. As we’ve discussed above, the condo fees ensure that the property as a whole is maintained and that common areas and amenities are up to standard as well. Unlike the mortgage, the condo fees do continue in perpetuity, meaning that you will be paying them forever. Therefore, it’s important to see what you will be paying in condo fees before you make the full commitment.
When looking at the fees, the best way to put them in perspective is by looking at what your amenities are. Amenities are the various perks and benefits that the condo building provides for its residents. Does it have a gym or a swimming pool? Does it have a community garden? Does it have all of the above plus an entire list of perks provided? So on, and so forth…These are things you should be taking into account because not only will you be part of that community, you will also be paying for all of the above. Therefore, you should keep in mind what the building or complex as a whole has to offer.
For condos specifically, you will also need to check in on how the condo board is doing. The condo board, as the administrative body, will be part of your life for the duration of your ownership of the unit. Because of this, it’s always a good idea to take a look and see at how the board is performing, what their membership is like, and generally how they operate. A good board will always do its best to be transparent and effective when it comes to dealing with day to day operations. Ultimately, the board needs to act in the best interest of the residents. They do not represent themselves, nor the management and contractors that they may hire. They are present to serve the residents and the community as a whole. Therefore, it’s always ideal to see a board that keeps its activities well documented and openly available to residents. Building upon that, a good way to tell the trustworthiness of a board is to see how they interact with their residents. Similar to assessing a landlord, you can ask yourself: Are they responsive? Do they take in feedback (even if it might be negative)? Do they react in a timely and efficient manner? These are all things to take into account because, once again, this organization will be part of your life for the duration of your ownership.
Additional factors to take into account are the status certificate and the reserve funds of the corporation. The status certificate provides information on the financial status of the condo corporation. Whether buying by yourself or with a realtor, it is always important to take a look at this document. If it is in good standing, then that is a reassuring sign that you can proceed. However if it isn’t in good standing, then that raises some red flags. You can ask yourself, how did it get to this point? Was the money mismanaged? Is the board ineffective at completing its tasks leading to a financial drain? It’s hard to name a specific cause and solution for all scenarios, so once the red flags appear you should be looking to get more information. At the end of the day, however, you should proceed with caution if the status certificate bares bad news.
There are two reasons why. First it involves the way the board conduct themselves. You will not want a board that is sluggish to respond to problems, or a board that will not be diligent when handling complaints. Similarly, you will want a board that is forward thinking with the kind of upgrades and repairs they plan out to ensure the proper standing of the building or complex. An unattractive status certificate may be a sign that they are not succeeding on these fronts. Secondly, it comes down to the money. You pay for the operations of the condo board as a resident, therefore you are paying for this particular organization to maintain your property on your behalf. Even more so, the condo corporation needs to always set some money aside for “rainy days” so to speak. This is called the reserve fund and it is to be used for routine maintenance, for future upgrades and improvements, as well as emergencies when they come up. You can check the reserve fund to see what level it is at. If it’s at a reasonable point, that is a good sign. However, if it is not, that could mean bad news for your pocket. This is because you can assume that the board will want to expand its reserve fund at some point in the future to be able to continue operations. This expansion can only happen by charging additional fees. Therefore, as a resident, you might be looking at your condo fees going up. This is all the more reason to take a look at all of the documentation before making your decision. We’ve said it before and will emphasize again, an informed consumer always has the upper hand!