You’d think with the condo market being a trash can on fire and investors generally losing money on new condos, there’d be a lull in condo development properties for sale.
However, with Mayor Olivia Chow’s push for new zoning and building regulations, there might be a flood of potential new modern condo development sites in play.
Like just this past week, two fourplexes in the Beaches were listed for sale as a “mid-rise development opportunity.”
Now, to be fair, this isn’t the first time this property has been listed. In fact, it was first listed back in January for $7,000,000.
However, after more than 100 days on the market, the price dropped by more than $1 million, and now 558-562 Kingston Rd. is listed for $5,788,000.
You’d think the price drop would make this property even more attractive to potential investors, but it’s more likely because no one wants to take on this project.
See, 558-562 Kingston Rd. is not really a straightforward development opportunity, since the two properties are fully tenanted.
Combined, the two homes at 558-564 Kingston Rd. boast eight two-bedroom rental units and a gross income of $184,272 per year, which sounds good.
However, that’s roughly $1,919 per month per unit, which is well below the current market rate of $3,091 for a two-bedroom.
And that’s where this enticing investment opportunity starts showing some cracks.
Now, if the building weren’t tenanted, it would be kind of a no-brainer – 558-564 Kingston Rd. is in a great location, and the lot size is a decent 91 by 150 feet, making it an ideal site for a mid-rise condo project.
Developers TGC and ARD have proposed an eight-storey residential project with 49 condo units and eight rental units on the site, featuring a design by Icon Architects, so any purchaser would be buying more than the property, and would also gain a pre-planned development.
But since there are tenants currently occupying the homes, any new investor can’t just kick everyone out so easily.
First, they’d need to give all tenants 120 days notice of plans to demolish the homes.
Then, since the rental property has more than five residential units, they might owe the tenants compensation for the inconvenience of needing to vacate the property while the rental unit renovations take place, which is a maximum of three months of rent.
The proposed building calls for eight rental units to replace the existing units on site in accordance with the City’s rental demolition policies, which will further cut into profit margins.
While that’s great for renters, as an investor whose main objective is to make money, the numbers don’t add up — or at least not in the short term.
So, while Toronto desperately needs more housing, it’s not surprising that people aren’t rushing to build condos anymore.
