Not a simple answer. In discussing this we’re going to assume the suite is a traditional condo representing good value in a good location such as King St W, St Lawrence Market or the Harbourfront. An example might be 954 King St W, 109 Front St E or Waterpark City. Obviously the numbers will be different if you’re considering a trendy loft or a Yorkville address which will obviously add costs. We’re going to have to make some general approximations on income and expenses. These figures will include 1 parking spot and the mortgage assumes a 25 percent downpayment paid monthly at an interest rate of 3.5 percent amortized over 30 years. We will also include a 1 bedroom plus den.

We need to look at the math from two points of view… cashflow and appreciation. Appreciation is difficult to predict but the general consensus is that 2 bedrooms are expected to appreciate at a greater rate for several reasons. Most new construction projects are comprised of many more 1 bedrooms than 2 bedrooms creating an imbalance in the supply ratio. It is likely that many of the current 1 bedroom owners who are mostly single, first time buyers will eventually want to move into a larger condo with their future partner. Also, as boomers downsize, the demand for 2 bedrooms is expected to increase. For these reasons, we are going to give 2 bedrooms a greater rate of appreciation.

Please note the ROI does not take into account the mortgage paying down the principal, vacancy or any repairs. We choose to look at ROI on a 5 year basis as we feel investors should be prepared to hold their condos for that length of time. At these prices, with 25% down, your condo investment is cashflow neutral or even about $50 negative per month in your first year. Investors will make their profits through appreciation so it all depends on which product you believe will benefit the most in the coming years. Although we believe 2 bedrooms will appreciate the most, it’s also important to consider that the largest pool of tenants are looking for 1 bedrooms or 1 bedroom plus dens. You may have less vacancy with a smaller unit but many also believe tenants in 2 bedrooms are more likely to stay longer. With 2 tenants you may feel more comfortable if one tenant loses their income, the rent can still be paid by the other.

I don’t think there is a simple answer to this question and the math alone can’t be your only guide. My personal opinion is that an 850 sq ft 2 bedroom, 2 washroom suite with parking in a good location with TTC access is the best investment in the coming years.

A high maintenance fee puts downward pressure on prices. When a buyer is determining how expensive a condo they can afford, they look at their monthly budget to calculate how much of a mortgage they can afford. They need to take into account the property taxes, mortgage, utilities and the maintenance fee. Obviously the lower the carrying costs, the more the buyer can put towards a mortgage payment… and a higher purchase price is affordable.

We see this time and time again with buildings which have high maintenance fees. They should be $0.50 to $0.60 per sq ft but some buildings in the city are over $0.80. In a 1000 sq ft suite, that can make a difference of around $300 per month. At today’s low interest rates, $300 per month is the equivalent of a $50,000 loan. So that can be the difference of your condo being worth $375,000 or $425,000.

A real life example of this are the Palace Pier and Palace Place buildings. These are luxury buildings with good amenities but more significantly, great service. I lose count of the number of staff I see working when I visit these buildings… multiple security staff in the lobby, parking garage attendant, valet parking, concierge, cleaners etc. I don’t see a fitness room as adding great cost over the long term but it’s easy to calculate the cost of all these staff. Having this staff is important to some people though so I don’t mean to criticize that choice but it’s important for buyers to understand that they result in a higher maintenance fee which results in lower suite prices.

If you live in a building with a high maintenance fee, perhaps your board could look at reducing costs by limiting concierge hours, re-negotiating cleaning and service contracts or a more aggressive reserve fund study. Although it may cause short term pain, if your maintenance fee is high because your building is trying to grow it’s reserve fund, a special assessment may be a better solution. This way you could keep your maintenance fee lower which would help keep suite values high and still grow your reserve fund. Simple to prove on paper but I’m sure would meet a lot of resistance in it’s application.

When considering buying a condo it’s important to review what’s included in the maintenance fee. It’s more often to find an ‘all inclusive’ fee in older buildings which don’t have seperate electricity meters. All inclusive maintenance fees usually aren’t better values… it might be easier for budgeting but most condo owners find lower carrying costs if they’re in control of their individual usage. Typical monthly maintenance fees include:

· heat and/or hydro
· water
· building insurance (does not include the condo unit’s insurance)
· building reserve fund contribution
· building property taxes (does not include the condo unit’s property taxes)
· common element repairs and improvements (drain system, roof, garage, grounds maintenance, exercise room, pool, utilities for common areas, concierge, security, cleaning, gardening, snow removal etc.)

Condo buyers should investigate the recent history of the building’s monthly fee as well as any planned increases before firming up their purchase. This is done by having your lawyer review the ‘Status Certificate’ of the building. If you want a condo with all the amenities, you have to be comfortable with a higher maintenance fee. If you’re looking for a low condo fee, then you should search for buildings with few amenities, no concierge and few staff.

Considering the maintenance fee when buying is very important as this regular monthly expense can have a big impact on your quality of life. Low maintenance fees are more important than ever since the introduction of the HST in Ontario. Although it will not be directly applied to maintenance fees, it will increase the cost of many services which make up the fee. Maintenance fees vary from condo to condo depending on which expenses are covered, how many suites are in the building, the age of the building, how many staff are employed and the ammenities.

As of January 2011, typical condo fees are $0.50 to $0.60 per sq ft. So an 800 square foot suite would have condo fees between $400 to $480 per month. This would be for a typical building that includes gas heating in the condo fee but not electricity. If electricity is included in the condo fee then you should add around $60 per month to be sure you’re comparing apples to apples.

Some buildings have a 24 hour concierge, parking valets, security, full time cleaners and extensive amenities. In my opinion, the cost of a large full time staff seems to be a large contributor to high condo fees. These buildings can have maintenance fees in the $0.85 per square foot range. Some value these services and are happy to pay that fee but this article is about buildings with low fees.

One condo townhouse development which has among the lowest condo fees are the South Beach Marina townhomes on Stadium Rd. Don’t expect many amenities or a concierge but I haven’t been able to find a better value for those looking to save money. I estimate current fees at South Beach Marina to be around $0.20 per square foot.

Another option if you prefer a building rather than a townhome is 1000 King St W, Massey Square. I’m not sure how they’re able to budget such low fees but they’re also very low. At the moment I estimate maintenance fees to be around $0.33 per square foot.

Another buiding worth visiting in the King St W area is 18 Stafford St, definitely worth considering if a low fee is important to you with monthly fees around $0.40 per sq ft.