You hear it all the time: Toronto is way too expensive to buy anything! In fact, houses downtown are over a million dollars!
What’s wrong with this statement? The idea that you need to live in a house right downtown. No one talks about buying houses in Manhattan or central London. Torontonians need to join their urban brethren and learn to live in condos, co-ops, and apartments like the rest of the world. Houses are for the rich and for the suburbs.
Luckily, Toronto has uncommonly nice real estate. Most condos are less than ten years old and boast luxurious amenities: a concierge, fitness centers, party rooms, indoor and outdoor pools, saunas, billiard rooms, show kitchens, pet spas, roof decks, grill areas, coworking spaces, and gardens. Toronto’s real estate is also significantly less expensive than other world class cities.
What’s a condo?
A condominium most commonly refers to a residential unit in a high-rise building, but plenty of condos don’t fit that description. Condos can be commercial units, townhouses, triplexes converted to sale, or any number of other styles. You own the condo unit and share ownership of common elements, such as the building and grounds.
While condos are pretty similar all around Canada (and the US), the laws and terminology differ from place to place. You should always check with your local real estate attorney and real estate agent before making any important decisions.
How we bought
When we first decided to move to Toronto, we also decided to use the time gathering immigration paperwork, waiting for our Express Entry ITA, and waiting for our PR to do our homework about making sure this was the right choice for us and figuring out where we wanted to live.
We visited frequently over the course of a year, staying in a different neighborhood each time. By staying in vacation apartment rentals for several days at a time, we got the chance to try out different apartment styles. This was especially important for us, since we both work from home. How important was a dedicated office space? Or two separate office spaces? We put dens, offices, and kitchen tables to the test around the city. This gave us a great idea of the minimum square footage we needed to be comfortable and what layouts work for our needs.
If you’re really into cooking, need to find a good space for your kids, or have another specific need that’s important to you, I highly recommend test-driving condos before you buy.
While, as you’ve probably guessed, we stayed in AirBnB’s during our apartment hunt, I don’t advocate using AirBnB. We had several bad experiences as AirBnB guests — filthy apartments, apartments different from the one pictured, apartments with no heat in winter, and even not being allowed to stay after having checked in and not getting our money back. Each time something went wrong, it would take days to get a response from AirBnB, so we’re eagerly waiting for a competitor to swoop in and fix the major flaws in their execution.
The amount of information available to the public in Canada is significantly less than what you can get in the US through Zillow and Street Easy. It was incredibly frustrating to not have access to floor plans, sales histories, and other details I’d come to take for granted. Your realtor can help you track this information down.
Early on in the buying process, I started dropping by all the condo centres we passed. There are a lot of them in Toronto. This is a great way to see your options, since you’re presented with all the floor plans for building units. Many of these floor plans are less than ideal, so if you like the floor plans and amenities in one building, you can check out resale condos in other buildings by that developer.
After buying and selling a co-op in Brooklyn, buying a condo seemed incredibly easy. We put in an offer, haggled a bit, and soon had a completed Agreement of Purchase and Sale (APS). I then provided a bank cheque for the deposit. The hardest part of the sale was getting the money transferred internationally.
Prior to closing, I wired the balance of the funds to my attorney’s trust and signed some paperwork. Once all of the papers were filed and the funds were released to the seller, I went back to my attorney’s office to pick up keys. And then I was done!
Should you rent or buy?
First, are you looking for a home or an investment? You’ll hear lots of stories about people making fortunes flipping pre-construction condos in Toronto. I’m pretty skeptical that fortunes can still be made that way. The recent numbers I’ve seen haven’t been terribly impressive, especially since resale units are selling for less than pre-construction.
Are you comfortable putting such a large portion of my net worth into a single asset? It’s a lot easier to sell stocks than sell a house. You may be better with other investments.
Is your condo an investment or a home?
For many people, their home is their biggest asset and most important investment. However, it’s also a place they’ll spend a huge amount of their time in and energy on. Plenty of people will urge you to buy the biggest condo you can afford or buy specifically with resale in mind. If you’re planning on living in the unit for a short time and then selling it, that may be fine. However, if you’re buying this primarily to live in for the long-term, you’re better off buying something that fits your needs, not the needs of a hypothetical future buyer.
There is no guarantee that real estate will appreciate in value. Even if it does, selling can be a lengthy process. If making a profit is your primary goal, research all of your options first.
Financing a condo purchase
The downpayment required can vary significantly, from 5% to 20%.
If you’re buying with a mortgage, you’ll want to get prequalified before you start looking. This shows agents and sellers you’re serious, as well as demonstrating how much money you can have access to. Remember to account for closing costs and the cost of moving.
As a new resident to Canada with a minimal credit history, it can be a challenge to get a mortgage. You may be able to find a mortgage through an international bank that will recognize your foreign credit history.
Choosing a realtor and attorney
Perhaps it’s related to the fact that I bought before I was a Canadian resident and that I regularly get carded at the LCBO, but I found it incredibly difficult to find a realtor in Toronto. I reached out to dozens of realtors, both by calling to set up appointments and stopping into real estate offices, all to no avail.
Your best bet is to ask friends, coworkers, and other people you know for a warm introduction to the real estate agent they worked with. This was how I finally found a realtor, Susan, who was great to work with.
In Ontario, you sign an agreement with a real estate agent when they start showing you properties, stating that they represent you as a buyer and will get a commission on any purchase you make for a certain timeframe. You don’t pay the real estate agent, your seller does.
Things to look for in any condo
Many people will tell you to make a wish list for your dream home. While this is a helpful exercise, it’s mostly just that — for fun. It’s pretty common to realize you’re not going to tick off every item, even from your must-haves, for your budget or in the location you want.
Still, it’s helpful to come up with a list of things you want and prioritize them before you get serious about looking. This helps you narrow your search. If you’re looking with a spouse, this is a helpful way to have important conversations privately, and not in front of your realtor or in a condo centre.
Choosing a great location
When looking at homes, people factor in the distance to the fun stuff, but figure their horrendous commute will be fine. Your way to work, trek to the grocery store, and distance to the LCBO have a major impact on your happiness. Do you want to carry cat litter six blocks home or have to drive to the store to get it? Are you really okay having a highway between you and the dog park? Getting on the train to do something special is fine, it’s how annoying your errands are that weighs on you.
- Subways and the GO are much more reliable than the streetcar
- Sure, you have parking at your condo, but will you have parking at work?
- How far will the grocery store, pharmacy, and other essentials feel when you’re carrying things, sick, or in the rain?
- What are the hours for the closest stores? Is there a 24-hour pharmacy nearby?
- Where’s the nearest hospital or clinic?
- Is there a park nearby?
- If you’re a frequent flier, make sure you have an easy route to the airport
Visit the neighborhood as many times as you can, at different times of the day and night. Is this a place you really want to live? Will it be a place you want to live five years from now?
If you’re not sure where you want to live, your best bet is to rent for a few months so you can have time to make the right decision about where you want to live.
Location in the building
Some units are better than others. If you’re bothered by cigarette smoke, make sure your unit (and air vent) isn’t near where smokers gather. Some spots in a building may be whisper quiet while others are plagued with street noise.
Noisy spots include units
- Next to the elevators
- Next to the garbage chute
- Above the garbage pick-up area
- Above the main entrance
- Above the entrance to the garage
- Adjacent to any common areas
- Under the common areas or roof deck
High units have great views, but could everyone living with you walk up and down the stairs if the power was out or there was a fire?
Storage and parking
Most condos don’t have a ton of storage, but many buildings provide storage lockers. Lockers are like a storage shed for your condo. Even generously sized condos don’t have space for unused furniture or special items you use once a year. If your unit doesn’t come with a locker, you may be able to buy or rent one. Of course, you can always rent a storage unit off-site.
Visitor parking is a great perk. Find out how many spots are available and what the rules are.
Units with parking spaces sell for more and you can rent out your parking space if you don’t need it. Many new buildings don’t offer parking spaces for units smaller than 1+. Parking space prices can vary significantly, from $15k to $60k per space. Most buildings always have parking spaces available for rent.
Condos in Toronto have a ton of amenities, especially if you’re coming from a city like New York with older buildings. As someone who couldn’t imagine myself using the amenities very often, I opted for a condo that had minimal amenities. Of course, in Toronto that means I have a 1,000 sf gym, sauna, billiards room, party room, concierge, small roofdeck with a grill, and a park outside. Our friends from Toronto think we’re slumming it; our friends from New York are jealous. It doesn’t matter to me, since I hardly use any of them.
Buildings with nice amenities will inevitably have higher maintenance costs, although large buildings can spread the costs of a pool over a larger number of units. The roof, elevators, and other utilities all require upkeep and upgrades over time. Buildings pay for snow removal, cleaning services, landscaping, security, and insurance costs. A well-managed building will charge enough in maintenance to effectively pre-pay for large expenses over time, so costs can be taken out of the building’s reserve funds. If the building doesn’t have enough money to cover necessary repairs, the owners will have to split the costs.
Older buildings may have higher maintenance fees because they’re carefully budgeting for future repairs and upgrades to keep the building in great condition. They’re also likely to include some of your utilities — that “high” fee may include your hydro and water costs.
Property taxes are not included in maintenance fees. In a resale unit, you can find out what owners paid last year and what the anticipated costs will be for this year. In a new unit, you can find out the estimated property taxes.
Your mortgage bank and your condo board will probably both require that you have insurance. Square One is one of the few insurance companies that will write policies for new residents without a credit history. They’re also a lot more open to short term rentals than your condo board.
What do you own?
Where does your unit end and the building begin? Do you own your parking spot or rent it? Is your storage locker owned? If a pipe breaks, wiring is frayed, or windows need to be replaced, who pays? Does the condo own the land it’s on? If not, when does the land lease expire? Could that dramatically increase costs? What does the maintenance fee cover? What restrictions are there in how you can use or modify your unit? Do you have exclusive use of any amenities?
Protecting your views
If you have a great view now, how long will it last? Proposed condo developments are clearly marked in their future locations. Even if there’s nothing in the works, you can do a little research to see if the buildings in front of you are protected, what the height restrictions are, and other things to help you guess if you’ll soon be staring into someone else’s windows.
Do some digging on the condo developer. Are they universally hated? Are their buildings falling apart or plagued by debt? Are they embroiled in lawsuits? It’s unheard of for a developer to not have someone complaining about them, but it’s helpful to see how serious those complaints are. Are people unhappy about the finish on the kitchen faucets or are the balconies falling off?
The condo board
Condos are run by a board of directors, typically made up of owners in that building. All condo owners have certain rights, including the right to attend general meetings and vote on decisions. You’ll get annual reports and updates about any changes. If the condo is sued, that includes everyone, including you.
The data you need
Your realtor can provide you with previous sales for your unit, building, or neighborhood. They can also provide you with information on how much a unit would rent for. Nothing is guaranteed, but this is critical information to make such a big investment decision. Ontario’s privacy laws make it basically impossible to get this information without a realtor.
Have your real estate attorney review the condominium documents and status certificate. If you don’t have access to these prior to putting in an offer, you can make your offer contingent on your lawyer’s review.
Resale v. new construction
In Toronto, condo buildings that are 10 years old are old. Coming from New York where living in a “pre-war” building built before 1940 was desirable, this seems laughable. Well maintained buildings can last a very long time. There’s no need to shy away from a building that’s 3, 7, or 15 years old.
Resale condos already exist, so you can walk through the space, see the finishes, and check out the view. You’re not just imagining things based on a floorplan and some samples.
Presale condos are typically more expensive than resale condos in Toronto. Pre-construction condos attempt to guess what the unit will be worth when you actually move into the building, while resale condos reflect current prices. Your presale condo prices aren’t for 2016, they’re the estimated market rate for when you’d move in in 2018 or 2019.
New construction is subject to HST, adding 13% to the cost of a condo in Ontario. Resale condos pay HST only on legal and real estate fees.
Your possession date for a resale condo is generally a solid calendar date, whereas construction delays can push out your move-in date for new construction condos for weeks, months, or, in rare cases, years.
Everything in a new condo sales offering is an estimate. The number of floors, amenities, floorplans, and finishes can all change. You’re not going to be living in the model suite.
Your mortgage interest rate may rise between when you make an offer on a new condo and when your building is actually registered. You may be able to get your bank to guarantee the rate for much longer than normal.
If the value of your condo at completion is less than the pre-construction price, your mortgage may not cover the complete cost you’ve agreed to in the contract. You’ll need to find cash to cover the difference.
Pre-approval for a mortgage is no guarantee that you’ll qualify for a mortgage, especially when you buy pre-sale and have a months or years long gap between pre-approval and actually getting the mortgage. Unless your pre-sale contract has a financing contingency, you will be responsible for payment, even if your mortgage is denied.
New condos are covered by the New Home Warranty Program.
Maintenance fees typically rise steeply in the first few years of a building’s life. Any problems not covered by the warranty of a new building will almost certainly result in an assessment, since the building starts out without a reserve.
The beauty of new construction is that the unit is a blank slate. You can customize your unit and generally have a selection of floorplans to choose from.
Moving into a new condo before it’s complete means living with construction noise. However, if you’re sensitive to construction noise, Toronto may not be the city for you.
Resale condos can provide you with data on past sales, building costs, maintenance increases, and building demographics. That information doesn’t exist for condos that haven’t been built yet.
Older buildings may include utilities in the maintenance fees, meaning your costs are entirely predictable from month to month and there’s only one bill to pay.
Buying new construction
When you buy a pre-construction condo, you’re signing a contract to get a finished condo at some point in the future. You don’t actually own anything until the building is complete. If you buy or sale a pre-construction condo, you’re actually assuming or assigning the contract.
Many condos have to you pay your deposit in several installments during the building process. After the deposit, you’re still responsible for getting a mortgage or paying the balance of the price. Some developers offer financing or have special agreements with mortgage lenders.
That period of time between when you move in and when the building is registered in Ontario is an awkward phase where you pay ‘phantom rent.’ The condo corporation can’t form until the building is registered, but you still have to pay to cover building costs. These costs are occupancy fees.
Condo owners are never happy with occupancy fees. Until your building is registered, you can live in your unit, but you don’t legally own it yet. Once the building is registered, you’ll get your mortgage and title for the property. You’re responsible for occupancy fees once your unit is ready to live in, even if you don’t actually move in.
While an occupancy period is unavoidable, buildings by experienced developers and high floor units pay them for a shorter time period.
Quite a few things can change between when you sign your contract and when you move into the building. It’s very common for apartment finishes and fixtures to change, so the tile and floor samples you see in the showroom may be nothing like the ones you get to choose from. The amenities may change significantly as well. Rarely, the number of floors may change.
The building I live in was originally intended to have small Juliet balconies. The renderings showed flowerpots on the balconies and they were large enough to stand on. The building was built without balconies. Our “Juliet balcony” has literally no floor, it’s just a door and a railing. Owners who have been here since the beginning are still bitter about it, more than a decade later.
Understanding a floor plan
Lots of things are easy to change in a home, but modifying a layout can be a big undertaking. Even widening a doorway in a condo can require months of approvals and the cost of an engineer and an architect, in addition to a contractor. Find a layout that works for you.
Toronto’s condos have some spectacularly bad floorplans. A floorplan provides a birds-eye-view of your unit’s layout.
- Familiarize yourself with the symbols they use
- How much of the square footage is wasted on hallways?
- Do you need a second bathroom in a one or two bedroom apartment?
- Is the den a room or a closet without a door?
- Will the doors hit each other or create awkwardness?
- Does the kitchen have enough space to move and work?
- Is there space for a kitchen table?
- Is there enough storage space in the bathroom?
- Is the shower stall too small?
- Is there a linen closet or pantry?
- Does the bedroom have space for a dresser?
- Is there enough space for the things you own?
- Are the bedrooms next to each other or will you have privacy?
- Is there room to work from home?
- Is there space for friends to spend the night?
When I first saw Toronto’s second bedrooms with interior windows and sliding glass doors, I was pretty horrified. They are very common, especially in small units or less expensive buildings. While not fully compliant with building code for a bedroom, developers easily get approval for variances, making them legal.
Initially we thought of interior windows as a deal-breaker, but in the end we chose a unit with a second bedroom with an interior glass door and a windowless den. I use the second bedroom as my office and love how I can open the doors and suddenly have a huge, open space. It helps that my office here gets more light than our previous courtyard-facing apartment. We ended up using the windowless den as our bedroom, which makes for a blissfully quiet sleep. It’s an odd layout, but it’s perfect for us.
Don’t trust the outlines of furniture in the floorplans. Quite a few have things wildly out of scale. When in doubt, measure the dimensions of a space you know to get an idea. Many of the bedrooms in condos are the legally mandated minimum — you’ll be banging your shins on the bed frame for all of eternity.
I use Floorplanner.com to make sure my furniture will fit in a space and get an idea of how it will really feel before I buy.
Make sure you know how high (or low) the ceilings will be. Find a space with the same ceiling height and decide if it feels claustrophobic to you.
Another big question is: will the windows open? This is something people have strong opinions on, so don’t get a surprise after you’ve signed the contract.
Buying pre-construction gives you the opportunity to customize your unit. You may be able to get upgrades, like premium finishes or a discounted storage unit, by signing early or helping them get to a critical sales percentage. The best perk may be getting a cap on closing costs written into your contract.
New condos are notorious for setting maintenance fees artificially low to attract buyers — and then when your building’s first budget review comes up they jump.
New building maintenance fees are priced as a per square foot estimate — usually in cents — which makes it seem even lower than it is. Calculate the estimate maintenance to have an easier time comparing prices and assessing costs. Look at how the maintenance fees have increased for other buildings, especially those by the same developer, to get an idea of the fees you’ll actually be paying.
The new condo buying process
Before you sign a purchase contract, you and your real estate attorney should review the Disclosure Statement. The Disclosure Statement contains information on
- Proposed condo bylaws
- Proposed amenities
- Common property, storage, and parking allocations
- Descriptions of appliances, furnishings, and finishes
- Estimated construction start and end dates
- Potential happenings that could affect the value, price, or use of the property without penalty
- Any builder penalties for delays, if any
You’ll also want your attorney to carefully review the pre-sale purchase contract.
Once the contract is signed, you typically provide a deposit of 5%. Most developers will only require ID and a cheque for $3,000, with the rest of the 5% due after the 10-day cooling off period. The balance of the deposit, generally 15-20% of the purchase price, is usually paid in installments.
In Ontario, you get a 10-day cooling off period, during which you can change your mind and cancel the contract and get your deposit back. This period is meant for you to arrange financing and review the agreement with your lawyer. This 10-day period is 10 calendar days, not business days.
After that, you wait while the developer takes care of the rest. You’ll get updates on building changes and construction updates.
Eventually, you’ll be able to move in and be required to pay occupancy fees until the building is registered.
Once the building is registered, your condo board will be formed, and you’ll (finally) own your condo.
At closing you’ll need to contribute two months of maintenance fees to the condo reserve fund. You’ll also pay closing costs, such as HST, builder closing costs, land transfer tax, and attorney fees. If you’re planning on occupying the condo yourself, you may qualify for an HST rebate. You’ll want to consult your attorney to get an idea of what closing costs will be and if there are any rebates available.
Buying a resale condo
House buyers almost always get properties inspected before they buy, but condo owners hardly ever bother. Spending money on an inspector can help avoid nightmares with building or unit issues you might otherwise miss.
It’s difficult to compare maintenance fees. Low maintenance fees can be a sign of a well-run building, or one that’s ignored necessary repairs. High maintenance fees can signify a well-thought-out plan to upgrade amenities or past mismanagement.
The biggest factor is what utilities, if any, are included in your maintenance fees. Does your maintenance fee include heat, air conditioning, hydro, and water? Does that include a fee for your parking space or locker, or are those additional? Would you cancel your gym membership if your condo building has a fitness center?
While your maintenance fees are an important factor to consider when figuring out what condos you can afford, don’t overlook a condo just because the maintenance seems high.
Realtors will tell you that maintenance fees range from $0.50/sf to $0.80/sf. Maintenance can be higher than that and still within the average if it includes utilities beyond water, such as heat, air conditioning, and hydro.
I chose a building with high maintenance fees, but they’re still significantly lower than my maintenance costs for my pre-war in Brooklyn. I get more amenities than my old place and only have to write one cheque each month, since all utilities are included. I also rest assured that my building has a healthy reserve fund, so I won’t have to pay an assessment for building upgrades or maintenance.
Who will your new neighbors be? If you’re an early riser, you might not want to live with a bunch of college kids. If you’re ready to party, you probably don’t want to live with quiet families. Hang around the lobby and chat with current residents.
The percentage of renters probably won’t have anything to do with your quality of life, but it can impact your resale value. Your realtor can provide you with the numbers.
The resale buying process
When making an offer, your realtor completes an Agreement of Purchase and Sale (APS). The APS includes a lot of information, typically
- The sale price
- The deposit amount
- What’s included (such as appliances and window treatments)
- Preferred closing date
- Conditions of the sale (document review, financing, inspection)
The sellers will either sign the APS, or provide a counter offer. Assuming you can reach an agreement, you end up with an APS that both parties have signed.
While bidding wars are common for houses, bidding wars for condos are relatively rare. You’re not guaranteed to have your offer accepted, but you don’t generally have to worry about a bidding frenzy.
Now you have to line up funds, including your mortgage. You’ll need to immediately provide whatever deposit you agreed to, which will be held in trust until closing.
Before you move in, you’ll want to transfer utilities into your name and buy condo insurance. You’ll also be busy arranging to move everything into your new home.
Assuming all the conditions are met, you sign paperwork, provide the balance of the funds and closing costs on the closing date and pick up keys. Your attorney will file paperwork and it’s unlikely that you’ll ever meet the seller.