New Condo vs Old condo

[theflyingsquirrel]

I am trying to do some research of how the age of condo affect the price.
For example, how is the price of a new condo compare to that of a 3 years condo.
If I purchase a new condo, am I going to loss money when it gets older?

 

[DSC]

I am trying to do some research of how the age of condo affect the price.
For example, how is the price of a new condo compare to that of a 3 years condo.
If I purchase a new condo, am I going to loss money when it gets older?

In the long run and based on the last 40 years yYou are probably not going to lose money on either but this does not meanprices for all buildings could not drop. If you are going to live in it you probably have a better idea of the annual costs (maintenance fees) if you buy an older condo. Monthly fees for new condos area lmost always set far too low and when they have their first Reserve Fund Study after 3 years they go up sharply.

 

[theflyingsquirrel]

So if I am going to sell, it is better to sell before 3 years?

 

[AKS]

In the long run and based on the last 40 years yYou are probably not going to lose money on either but this does not meanprices for all buildings could not drop. If you are going to live in it you probably have a better idea of the annual costs (maintenance fees) if you buy an older condo. Monthly fees for new condos area lmost always set far too low and when they have their first Reserve Fund Study after 3 years they go up sharply.

They do a reserve fund study for new condos before it's registered. If you look in the closing docs from the lawyer, it's charged in it. How often they do reserve fund studies is another matter, but the first one is definitely not done after 3 years. It's already done before closing. It also depends how fast the bills come in. For example, the waste management bill didn't come until 2 years after closing. So there were unforeseen costs which causes fees to go up. I'm not sure of all buildings, but some do reserve fund study annually.

 

[theflyingsquirrel]

So it is better to sell within 2 years then.
I think in the future years, there is going to be some change in how we manage condo.
For example, the property manager that I never see in the office can be removed and we can have one property manager manging a few condos.
We should think more about how to reduce the condo fee and make condo more affordable.
With the price of condo going up and close to that of town house and detached, there definately have some pressure to change.

 

[uptownto]

So it is better to sell within 2 years then.
I think in the future years, there is going to be some change in how we manage condo.
For example, the property manager that I never see in the office can be removed and we can have one property manager manging a few condos.
We should think more about how to reduce the condo fee and make condo more affordable.
With the price of condo going up and close to that of town house and detached, there definately have some pressure to change.

You should familiarize yourself with condo budgets. They don't really change because of the building age. The reason is because by law, condos are forced to maintain a reserve fund for planned replacements to building elements. Any building old or new is susceptible to bad management.

In my building, almost 40% of the budget is for utilities (hydro,gas,water,cable). 30% is for services (cleaning, security, ground maintenance, garbage) , and 20% for reserve fund. Property management which you cite, and things like "amenities" which people like to blame for high condo fees make up a tiny proportion of the budget, almost not worth considering.

Still comes out to just over 50cents a square foot which is basically the going rate in my area regardless if your building is brand new or 25 years old.

As others said, developers like to underestimate the operating budget to attract buyers. I guess buyers like maintenance free living for cheap. So there's potential to exploit dumb new buyers before the board has to figure out it needs to make its budget realistic. So yeah, sell within 2 years. Unfortunately for you when a new building comes on line 50 other people like you have the same idea and try to sell their units at the same time.

 

[Chris_Hull]

new one is definitely better

 

[DSC]

They do a reserve fund study for new condos before it's registered. If you look in the closing docs from the lawyer, it's charged in it. How often they do reserve fund studies is another matter, but the first one is definitely not done after 3 years. It's already done before closing. It also depends how fast the bills come in. For example, the waste management bill didn't come until 2 years after closing. So there were unforeseen costs which causes fees to go up. I'm not sure of all buildings, but some do reserve fund study annually.

I think you are confusing annual operating budgets (waste disposal etc) with reserve funds (major repairs and replacements). Under the Condominium Act the developer is not expected to have a reserve fund study done; the first study is only done once a Corrporation is formed. The Developer certainly prepares an annual budget but, in fairness, it is hard to be sure of many costs (e.g. utilities) until there has been a year of activity. However, I understand that operating costs in the second year tend to increase significantly, presumably because the developer underestimates. In Ontario Reserve Fund Studies must be done AT LEAST every 3-years and a new Corporation should have one done as soon as possible after its creation. RF studies cost money so I doubt many Corporations do one every year - they look 30-years into the future. The Act actually says that until a RF Study is done you must contribute an amount equal to at least 10% of the operating costs. 10% is very low; most established condo corps contribute between 20-40% so it is not surprising fees rise after the first Study is done.

 

[AKS]

I think you are confusing annual operating budgets (waste disposal etc) with reserve funds (major repairs and replacements). Under the Condominium Act the developer is not expected to have a reserve fund study done; the first study is only done once a Corrporation is formed. The Developer certainly prepares an annual budget but, in fairness, it is hard to be sure of many costs (e.g. utilities) until there has been a year of activity. However, I understand that operating costs in the second year tend to increase significantly, presumably because the developer underestimates. In Ontario Reserve Fund Studies must be done AT LEAST every 3-years and a new Corporation should have one done as soon as possible after its creation. RF studies cost money so I doubt many Corporations do one every year - they look 30-years into the future. The Act actually says that until a RF Study is done you must contribute an amount equal to at least 10% of the operating costs. 10% is very low; most established condo corps contribute between 20-40% so it is not surprising fees rise after the first Study is done.

I'm not sure where the board took the waste disposal costs from. It was higher than the board expected. Maybe it was from the operating budget and came in as a deficit so that increased the next years fees. But the point is, the board won't know how much it will cost until the bill comes in which is quite shocking. I think it was around 2 million or so.

In regards to Reserve fund study not done at closing. Then why are builders charging reserve fund study in the closing documents?

Reserve Fund Study
---------------------------
(Paragraph 5(c). Schedule A of Agreement)
Purchasers share (0.165696 of $9,000)
Credit Vendor

 

[jbtaylor]

One thing for sure older usually means bigger. All buildings must have maintenance fees that will cover operating costs and fund the reserve. Its usually after 10 years that the reserve fund forecast starts to become realistic. Before that most are underfunded.

 

[Rocky]

So it is better to sell within 2 years then.
.

So would the above statement still hold true in today's market, I dont want to start up new thread while don't want to hijack this one either - but i am wondering if i have newer condo coming available for occupancy and registration soon - is it a better idea to put it up for sale (while its unused) or would moving into the condo impact the attraction and selling price, I don't have a problem holding the condo for a couple of months and neither am i looking for some crazy profit - but i do need the cash that i have stuck in this pre-construction property and am debating if i should move in and try selling after a while or would selling it new potentially be more attractive to potential buyers ?

 

[zaindo]

IMHO a serious buyer might be interested in a unused (never lived in Condo) if it matches their price point. If have pockets deep enough to keep the unit unused for a couple months - it wont be a bad idea to try and sell it in brand new condition versus living in it. This is my opinion only - others might differ.

 

[marsh]

If you never live in the condo though I don't think you are eligible for the capital gains exemption on the sale of a principal residence. So that's one thing to consider. I personally don't think its a big deal whether its been occupied or not so long as the unit has been well taken care of and its a good building.

 

[jbtaylor]

If you never live in the condo though I don't think you are eligible for the capital gains exemption on the sale of a principal residence. So that's one thing to consider. I personally don't think its a big deal whether its been occupied or not so long as the unit has been well taken care of and its a good building.

I believe this is correct with regards to capital gains. You must live in the condo and declare it as your principle residence in order to be exempt from capital gains. You can only claim one principle residence in any taxation year. It gets complicated. The CRA has a good interpretation bulletin.

http://www.cra-arc.gc.ca/E/pub/tp/it120r6/it120r6-e.pdf