Pros and Cons of Buying a Condo in an Older Building
September 15, 2019
It’s easy to see the appeal in a brand new or pre-construction condo. Everybody wants to live in a place that hasn’t been lived in. You can choose your own finishes and chances are there are more amenities than in an older building. (Rooftop pool, anyone?) The maintenance fees also appear reasonable, which can help with the budget (more on that below). So why would you want to consider a re-sale? Here are my top four reasons:
Quality of Construction
You’ve probably heard the expression “They don’t build them like they used to,” and this is true for condos. For the most part, older buildings (from the 1970s and 80s) are built better – especially when it comes to soundproofing. Some new buildings have decent soundproofing, but many have sound issues between suites. This is something you can’t tell when you’re buying from plans or visiting suites at off-peak times when most residents are at work. One of the advantages of buying a resale property over new construction from the sales centre is that, when I’m showing suites in an existing building to a client, I always talk to people in the elevator and ask a resident the “hard questions” in front of my clients. Someone who currently lives in the building can tell you the real story on the pros and cons of the building.
Another thing to remember is that all buildings will require extensive upgrades over time to maintain the building to current standards. Many older buildings have already done these upgrades and their budgets and reserve funds will have paid for them. This means that potentially, there won’t be further financial burden on a new purchaser. So in some instances, there are older buildings that have been upgraded to the point that it’s almost like you’re moving into a new building… but you get the advantage of getting more space at a lesser cost. Who doesn’t love that?
When it comes to pre-construction, the developer will often promote lower maintenance fees, but the lower fees often don’t last for too long once the new building gets into its first couple of years of existence. A developer creates the budget for the building based on expectation and not necessarily the reality of the market at the time the building is registered. Operational costs will have risen, inflation and the reality of running the new corporation often sees increases; sometimes up to 40%.
Maintenance fees are normalizing across the city so you should expect to pay between 70 and 90 cents per square foot. Any cheaper than that and you’re likely looking at a very small building with no amenities and the fees are just covering landscaping and common elements maintenance. While maintenance fees for an older building can appear higher, make sure you know what the fees cover. In older buildings, they can include everything, including cable, internet and water.
Regardless of whether you’re buying new or re-sale, those fees will continue to increase, but in an established building you can find out what the history of those increases is.
Another benefit of an older building is that they should have a healthy reserve fund for capital improvements such as garage repair and window replacement, which are scheduled.
Newer buildings have lower reserve funds to pay for any improvements or upgrades due to deficiencies from the builder. If major repairs are necessary and they’re not covered by the reserve fund, you could get hit with a dreaded special assessment. When this happens, each resident has to pay additional fees (from the hundreds to the thousands) based on the size of their unit.
I get that a new building is pretty. The carpet in the hallway is fresh and everything is clean. It’s exciting. One drawback of new construction is that spaces continue to get smaller as time passes, so price per square foot tends to be higher and you get less space for more money, which doesn’t seem like the best deal but people like shiny new things and often get distracted by them. The cost per square foot for a new build in Toronto is now $1000 and up. Most older buildings tend to be priced at roughly $700-$800 per square foot.
The advantage of older buildings is units are larger and you get them for less money– the builder wasn’t trying to wring two bedrooms out of 600 square feet. The suite may have some wear and tear, but over time it’s something you can modify to create your own space and upgrade to your liking.
All the money you’re saving buying in an older building could be spent renovating. Rather than buying a smaller space that you are likely to outgrow quickly, you could make a resale unit pretty sweet.
Many units in new buildings are bought by investors to rent out, which is great for the city’s rental market, but not terrific for owners who are living in their units. Older buildings tend to have more of a sense of community – when you’ve lived somewhere for 20 years, chances are you know at least a few of your neighbours. In a brand-new high rise, residents tend to be much more transient; it’s not unusual for new buildings to be anywhere from 50-80% tenanted. Due to this, there’s less pride of ownership in new buildings, more wear and tear and a completely different vibe. Older buildings usually have fewer students (depending on the location) and it’s a generally calmer more family oriented vibe… and by “family” I don’t necessarily mean kids. I mean like how we’re all a part of an “urban family”. Plus, it’s helpful to have someone close by to feed your cat or walk your dog in an emergency, am I right?
Some may find that there’s a certain level of loneliness and disconnect in the bigger towers. People don’t talk to anybody and it can be challenging. There tends to be a higher level of connection in an older building, a community where people say hello to each other. People may be nosier but are also more engaged with the environment, and it could be because they’re older.
Ultimately, your choice depends on what your priorities are. If you have any questions about Toronto’s real estate market, please give me a call!