The six big mistakes

This page does not apply to anyone intending on becoming a slumlord who is mainly interested in a positive cash flow.

1. Buying in a neglected condo corporation
Buying a "starter home" or an "entry level" condo unit is very risky. Sure they are cheap but the maintenance in many of these condos have been neglected for years and huge repair bills are on the way.

You need to buy a unit in a condo that will appreciate in value, so that you build equity so you can move up to a better home. Units in neglected condos may be more at risk of going into administration or termination than being a wise real estate investment.

2. Low-income building
Buying a unit in a condo corporation where the majority of owners have low incomes. They will keep the maintenance fees low and the building will be run into the ground.

3. Buying in a condo-rental building
Buying a unit in one of these huge 350 to 600 units condo corporations that mainly consist of bachelor units and tiny one-bedroom units. These are actually rental buildings that have hundreds of small-time mom and pop landlords who also don't have a clue what they are doing.

I also recommend staying away from condos where the Declaration allows short-term rentals of furnished units. These condos allow unit owners to use Airbnb and its competitors to rent units as if they were hotel-suites.

4. Values peaked
Buying a unit in a condo corporation where the prices have not gone up in the last several years. Guess what? When a rocket stops going up, it stalls and then starts coming down.

5. Being an uninformed buyer
Buying a condo, when you don't have a clue what you are doing, isthe most dangerous type of home ownership yet invented in Canada. So adding to the risk you:

a.)	Don't use a reputable Realtor to act on your behalf (a buyer's agent).
b.)	Don't hire an experienced home inspector; someone who may discover that the unit has serious mould problems, aluminum wiring, Kitec plumbing, illegal electrical wiring or plumbing, water leaks or insect infestations.
c.)	Don't take the budget and audited financial statements to a condo accountant for a professional opinion.
d.)	Hire the cheapest real estate lawyer you could find.

6. Staying too long

Staying past the best-before date. Condos are like jugs of milk. They have best-before-dates. Their warning labels are:

• The monthly fees have not gone up in the past 2-5 years.
• AGMs are held every two to three years, or maybe longer.
• The notes in the back of the audited financial statements indicate problems.
• The Reserve Fund Studies recommendations are being ignored.
• Selling prices have peaked or are heading downwards.
• The average number of days the units are on the market are rising.
• The informed owners have sold and are long-gone.
• The directors have their units up for sale or have sold.
• There are water leaks in the garage whenever it rains.
• Maintenance problems are being ignored.


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