Toronto's Real Estate Magazine
Invest Like a Pro.
What are savvy condo investors buying to stay ahead of the curve and maximize their returns?
This is a great question. When I began selling downtown investment condos in 2002 the ideal investment apartment was a 700 square foot one bedroom. By 2007 that had shrunk to 600 square feet. In 2012 the 500-550 square foot one bedroom was all the rage.
The point here is that the curve is sliding towards smaller condos as prices rise and incomes do not keep pace.
Today the ideal size for an investment one bedroom is 400-450 square feet. So, what is the future? Well, it is nearly impossible to design a condo with a bedroom in less than 400 square feet so the future is studios. Not 400 square foot studios which compete with small one bedrooms which is a battle they will lose every time but rather 300 to 350 square foot studios. Who wants to live in a 300 square foot studio?
Truth be told, nobody really wants to live in a 300 square foot studio but nobody really wants to live in a 400 square foot one bedroom either.
The future of Toronto housing will not be dictated by what people “want” but rather by what they can afford. It is no secret that affordability is quickly eroding in Toronto. The one bedroom which is currently being sold pre-construction for $1400 per square foot will have to rent for $2700 to $3000 to make sense. Studios which can be rented for $2000 to $2200 per month will take the place of the small one bedroom as the entry level apartment for young people coming to work in the downtown core.
Alternatively, the small two bedroom (560-650 square feet) is now a very good investment as those who cannot afford a one bedroom choose to double up as roommates rather than move into a studio. In the rental market and in the resale market, these are going to become the entry level family apartment for young urbanites who want to start a family as well.
Today’s savvy investor who wants to get ahead of the curve should be looking at small studios and small two bedrooms to add to their investment portfolio.