# Condo vs Freehold



## Underworld (Aug 26, 2009)

Hi folk,

We are just looking at buying our first rental property. We could afford a condo right now, or carry on saving for a freehold house. My wife is pushing me for a condo as its quicker to save up the down payment for.

Can any experienced landlords share their thoughts?

My issue with a condo is you are paying condo fees every month which sucks. Then you have to do analysis into the condo board to make sure they are running a tight ship. Then you are also eligible to pay for those special assessments should they arise - like chip in for a new roof.

When I think about it, yes we can buy it earlier with a smaller downpayment. But if we're paying $300 p/m for 25 years, that is 90,000 dollars of extra costs! 

Thoughts or experience are appreciated!


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## Just a Guy (Mar 27, 2012)

First off, when looking for a property, look at the cash flow of the property. In that calculation, you need to look at all expenses, including the downpayment and maintenance. 

The condo fees are usually not an extra expense if the condo is set up properly, it is the maintenance fee that you would have in a freehold property.

Just because your property is freehold doesn't mean the roof doesn't need replacement after time...the problem is, many landlords don't budget for it and it becomes a large expense, as opposed to a monthly fee that builds up until required.

Special assessments are only done if the board didn't plan well usually, or something unforeseen happens...

Condos generally offset other expenses by the volume discount they can get for maintenance, but you also have to deal with communal living. With rentals, that can mean more complaints about tenants.

If you buy into a condo, you should get on the condo board to direct where your funds are spent. 

Both types of properties have their advantages and disadvantages...but if the cash flow doesn't work, then neither is a good investment.

P.s. Personally, I'd prefer to have multiple properties over one more expensive one. The more you have, the more you have paying rent...only one door, costs you money if it's vacant. Also, lower prices means you can charge lower rents if you need to.


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## Letran (Apr 7, 2014)

Underworld said:


> My issue with a condo is you are paying condo fees every month which sucks. Then you have to do analysis into the condo board to make sure they are running a tight ship. Then you are also eligible to pay for those special assessments should they arise - like chip in for a new roof.
> 
> When I think about it, yes we can buy it earlier with a smaller downpayment. But if we're paying $300 p/m for 25 years, that is 90,000 dollars of extra costs!


You are buying a rental property, NOT getting married to it  Read below I don't suggest you hold to a condo that long.

as JaG mentioned, keep your eye on the ball. Its positive cash flow that matters. 

The first time I did this I also had vacancy calculation, demographics analysis and exit strategy (just in case I had to get out).

In Canada, I prefer condos, easier to maintain, stable expenses, less surprises. There are some valid concerns about maintenance fees. Make sure that the building's reserve study is recent and updated and that of course the reserve is healthy. Also make sure that the maintenance fees are comparable to nearby condos. Also find out the ratio between homeowners and landlords. I try to buy condos younger than 20 years old. Maintenance becomes unpredictable on older condo's. I haven't yet done this in practice but I plan to cycle my condos for younger newly built ones every 10-15 years. (I've had older condos, property values goes down as maintenance fees go up).

Good Luck and Congratulations


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## MorningCoffee (May 8, 2013)

Another thing to look into is if they even allow tenants. Some condos have strict rules against investors buying units and renting them out.


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## kcowan (Jul 1, 2010)

I think you should talk to the condo board members and interpret their rules to see if they are on the same page as you. If you find a match, then go for it.


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## Just a Guy (Mar 27, 2012)

Also, remember that costs are going to go up, not down...especially when it comes to interest. If you were buying today, make sure you've got a healthy cash flow (by that I mean you are making several hundred dollars in profit), because you can't count on raising rents just because your expenses have increased (it may work sometimes, but rents are driven by supply and demand, not your income needs). You can probably bank on an interest rate hike before you've paid off your property.

Over the years, I've had to lower my rents at times, and right now I'm redoing a place's interior costing about $5000 because the last tenant wasn't very good, even with a good tenant you're probably looking at $1000-$1500 to repaint. This is a business not an ATM.


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