There are several reasons why lofts make for great investments. Whether you are an investor or looking for your next home, this article will give you a quick overview of why lofts are appealing from an investment perspective.
The following are what most real estate investors research before making a purchase — and how lofts fit into the mold.
- Location
- Supply/Demand
- Maintenance Costs
Location:
It’s simple. Investors purchase a property, find a tenant to cover the mortgage and maintenance fees and then wait.
This is where most people ask, “Well, just how long do they wait? It can take 25 – 35 years to pay off a mortgage.” This is exactly why location is critical… and why successful investors only purchase in locations that are undergoing significant “gentrification.”
Up and coming locations are often located in what’s referred to as a “Ripple Effect Zone”. These are areas that are appreciating substantially as a result of being located close or next to an already well established – and expensive – part of the city.
Lofts play into this (especially true factory/warehouse conversion lofts) because there happen to be many of them in these “up and coming” areas, such as: Corktown and Leslieville going east and Roncesvalles and Parkdale going west.
If a loft is purchased for $375 per square foot in an area that has yet to blossom, it may be worth up to $450 per square foot in a few years as Toronto continues to expand and populate with higher income earners.
Currently, the average cost per square foot of a loft within the city core ranges from $450 – $550, depending on the floor level, view and finishes. By city core, I mean from about St. Clair south to Front Street, and Church Street going West to Spadina. It’s the areas just outside of this grid that are really ideal as investments.
Supply/Demand:
Lofts are already in low supply and high demand, compared to standard condominiums. If you’ve taken a walk around Toronto lately, you’ve probably noticed that there are new condos popping up everywhere. This will never be the case for lofts, as there is a finite number of factories and warehouses that can be converted into true, “hard lofts”.
As more and more condo developments are built, they will continue to outweigh the number of hard lofts, limiting supply even further and creating more demand. For every completed condo development, the novelty factor for lofts increases – making them more desirable.
Maintenance Costs:
Lofts generally have low maintenance fees as a result of the smaller building sizes and the lack of facilities. Just like we pay taxes for roads, health care, public education etc, condos with 24 hour security/concierge, swimming pools, gyms and billiard/party rooms have high maintenance fees to pay for all the amenities. Higher maintenance fees make purchases less appealing and in turn hurt the value of most condos.
Some people would certainly prefer to pay more for these perks, however from a strictly financial perspective, they don’t make for great investments.
Case in point: Lofts make for better investments than most condos.
I hope you’ve found this article to be informative! For more information about investing in Toronto real estate and/or Lofts, call me at 647.637.6396 or send an email.
Robert Van Rhijn
