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Condos offer a lucrative return over time

Condos offer a lucrative return over time

In 1982, Brad Lamb was studying engineering at Queen's University in Kingston and sharing a seven-bedroom house with nine others. With monthly rent set at $100 per person, it was a great deal for cash-strapped students. But when the owners put the property up for sale at $50,000 one spring day, young Brad was stunned.

"I pulled out my calculator and figured out how much a mortgage would cost," recalls Lamb. "The taxes were on the flyer and I figured these guys were making crazy money. The net cash flow after all costs, with a 25 per cent down payment, was something to the tune of $6,000 a year, and that was just free cash flow."

Armed with his engineering degree, Lamb promptly set out to become a landlord. He worked for four years as an engineer while buying and selling property "with other people's money," he says. By 1988, he was earning $50,000 a year as an engineer yet "my real estate agent made $70,000 from me alone that year in real estate commissions." It was enough to hang up his pinky ring, earn a real estate licence and get into the game full-time.

Since then, Lamb has bought, sold and managed several hundred properties, mainly in condominium towers in Toronto, Ottawa and Montreal. The profit earned him the seed capital to launch Lamb Development Corp. in 2001 for $3 million, and it solidified his opinion that buying condos as investments is a wise move.

"An individual can easily manage four or five condominium rental suites and have a full-time job," Lamb says. "Four or five, after 25 years, will make you enough money to live like a king. You'll pay off your mortgage, you'll have $2 million or $3 million of net equity. And anyone can retire on that."

With cranes continuing to dot the city, there's no shortage of condominium units. Urbanation reports 50 per cent of new condos sold in the Toronto Census Metropolitan Area are purchased by investors, with the number skyrocketing to 90 per cent in parts of downtown where price per square foot averages $550. Gone is the bad rap of the 1990s when investors were considered speculators, unable to come up with enough funds to close the deal. Today's investors are classy businesspeople, and they are generally renting to responsible tenants who simply can't yet afford to buy.

Urbanation places the average rental price at $2.11 per square foot, up 2.2 per cent from last year.

With nearly 18,000 new condominium suites selling annually over the past five years, it's predicted an additional 7,000 suites will be added to the condominium rental pool annually over the next few years.

By far, buyers originally from Pakistan, India, Iran, China, Korea and Russia are the biggest investors in Toronto's condo market. According to Simon Mass, senior vice-president at The Condo Store, most have lived in Canada for years and were raised in cultures where owning property pays off.

"You typically don't get any WASP buyers in preconstruction condos," says Mass, whose company matches affluent clients with about 1,200 pre-construction units every year. "Go to an opening and you'll see everybody who's buying is of a certain ethnic group because they believe in the market. In their own countries they became very wealthy on real estate.

 SOURCE: The Montreal Gazette