Why Small Condos Are Better Than Big Condos When It Comes to Investment?

Mar 7, 2022 | 0 comments

A client came to ask me in the past few days, saying that someone told her that investors should buy a more giant condo than a small one. What do I think? I said to her: “You can go and see the new pre-construction projects. Many of them are bought by investors. After some time, the remaining units are large-area units or small-area units. I don’t know which one is more popular. No? Everyone is not stupid. As a seller’s agent, I told her that I have sold many condos, and I often help landlords rent them out. Small-sized condos are always easy to rent and sell.

The customer does not give up and asks what the reason is? I have roughly summed up the following points:

  1. Large-scale condo management fees are relatively high! The management fee of many buildings is 80-90 cents per square foot, and a large-area condo often costs $800-$1000 per month, which is very stressful for investors. And once the years are old, the building is poorly managed, and the management fee rises, it will be tough to sell this condo.
  2. Large-sized condo rentals are more difficult to find tenants than small-area rentals, and there are often management problems. For example, two good friends rent together, but after a few months, they have a conflict, and one of them moves out, which will be very troublesome. In addition, there will also be tenants who sublet one of the rooms or do Airbnb and even receive a fine from the building management.
  3. Large-sized condos have higher house prices higher entry barriers, and investors generally have limited budgets. Large-size condos are more attractive to self-occupied buyers, so the investment properties are relatively poor.

In fact, there has been a saying that a large condo is better than a small one over the years. It is mainly what the salesperson who especially pushes off-plan properties likes to say. The reason is that large-scale condos are not easy to sell, so they want to use this kind of rhetoric, and as a result, some buyers really believe it.

Of course, there are also suitable people for large-scale condos. Here I also summarize:

  1. For friends who have self-occupation needs but cannot get on the car for freehold due to a limited budget, you can consider using a large-area condo to transition first. In addition, I have encountered some customers who primarily like to live in condos and enjoy the environment of DT. They will also give priority to large-sized condos.

  2. For landlords who are committed to Airbnb or sub-leasing and are not afraid of trouble, the rate of return for sub-leasing of large-sized condos is still higher than that of small-scale condos.

  3. Some parents buy condos for their children to study in college and rent a room to their classmates, which significantly reduces the cost of holding, and usually does not feel lonely. After graduating in four years, the tuition increase has earned it back, and I have seen many such examples.

Do you prefer a large condo or a small one? Welcome to comment below.

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Written by Ghazal Jessani

Ghazal has extensive experience in pre-construction developments, serving as a guest blogger to CondoOutlet.ca. Before entering the real estate industry, she worked as a manager in a global accounting firm. Ghazal holds an MBA degree from the Rotman School of Business at the University of Toronto.