HOW TO CHOOSE CONDO UNIT TYPES - STUDIO, 1 BED, 1+DEN, OR 2 BED?By CondoWong Saturday, September 21, 2019
The 4 most common types of units in a condo building are studio, 1 bedroom, 1 + den and 2 bedroom. Which one should you pick?
I’m going to share with you 3 tips on how to pick the condo unit type based on the amount of down payment, rent-to-price ratio and layout.
Tip #1 - Down Payment
For an investment unit, you typically need 20% down payment.
Let me show you some typically numbers based on the downtown Toronto market today.
The typical price is $500,000 for a studio unit.
That means you need to have a minimum of $100,000 cash ready.
You need to be careful if you are investing in a studio unit.
If the size of the unit is below 400 square feet, the bank may need you to double up your down payment to 40%.
The down payment will be even more than that of a 2 bedroom unit, but of course the mortgage amount that you need to qualify for will be much smaller.
Tip #2 - Rent to Price Ratio
Studio units typically give the best rent to price ratio.
Let me show you some numbers based on the market rent in downtown Toronto today.
For investment, it is best to pick a unit that falls into the typical size of its type.
For example, if you pick a one bedroom unit, you should pick on with typical size, which is 475 square feet to 550 square feet.
Why? Because units with typical size range are most popular for rent and for resell.
A unit that's outside the typical size range, such as 700 square feet one bedroom unit, may not give you the best investment return.
Tip #3 - Layout
If you choose a 1+Den layout, the size of the den must be big enough to accomodate a sofa bed.
I would say a minimum size den is around 50 square feet to consider it usable.
For 50 square feet more, I would only pay a maximum of $100,000 more than a 1 bedroom unit in the same building.
A complete 2 bedroom unit should have 2 bedrooms and 2 bathrooms.
If you choose a 2 bedroom unit with only 1 bathroom, make sure it’s priced around 10% less than a complete 2 bedroom.
Those are my 3 simple tips on choosing the condo unit type.
Of course, there may be other factors to consider before you can come to your final decision.
If you need advice on selecting the unit type based on your personal situation, you can schedule a call with me.
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