A few years ago I remember a conversation I had with an investor. The couple were considering purchasing a rental property and our chat centered around what type of property would offer the best return over a 5 year plan. We looked at detached and semi-detached homes, condo townhomes and freehold townhomes. I created a report for them doing my best to simplify the costs of buying (downpayment,) carrying costs (monthly mortgage and property taxes,) and condo fees if applicable. The report was a bit surprising for me, even though I research the market on a weekly basis.
I have updated the numbers for returns on the above property types over the past 5 years to give a sense of where the best returns are for a buyer for either a personal home or a rental property.
Here is the first “snapshot” of an overview of how much the values have increased in Oshawa.
Sept/19 Sept/24 % +/-
Detached homes $566,000 $855,000 51%
Semi-Detached $415,000 | $668,000 61%
Attached homes $463,000 | $752,000 66%
Condo Townhomes $323,000 | $592,000 83%
At first glance it would appear that condo townhomes were the best investment, however one thing that is a factor with condos are maintenance fees. A quick search shows that the “typical” condo fee in Durham is around $300/month and over a 5 year period a condo buyer would pay $18,000 in maintenance fees that would not be required for the other types of homes. If a Buyer was using 20% as a downpayment they would need the largest downpayment for a Detached home and the mortgage payment would be the largest of the 4 types of properties. In an attempt to equalize all of the returns what I did for my clients was to deduct the carrying costs for the property from the total increase in value which would give them a true picture of what the best investment was.
Using detached homes as an example I deducted the mortgage and taxes over a five year period which amounted to $182,800 and deducted this amount from the selling price in Sept/24. This indicated that the true return on the Buyers investment in a detached home was 32% over the 5 year period. Here are how all of the property types looked as investments.
Detached homes | 32% net increase in value.
Semi detached homes | 29% increase in value.
Attached homes | 20% increase in value.
Condo townhomes | 45% increase in value.
All in all the best investment was a condo townhome with detached homes coming in second.
If we expand our inquiry, looking at return on downpayment, it is clear that to purchase a detached home requires a larger investment than a condo townhome, so here is how the return on the initial down payment looks like.
20% down payment return on down payment
Detached homes $113,200 106%
Semi detached homes $83,000 44%
Attached homes $92,600 103%
Condo townhomes $64,600 124%
I found the investment results amazing. With the smallest down payment, the purchase of a condo townhome proved to be the best investment. In the end when I did this exercise 5 years ago, the Buyers I was working with opted for a detached home and their return was excellent, however they could have purchased 2 condo townhomes for about the same downpayment with an even better return.
If we look into the future and ponder where the market is heading, with the same increases in value we have seen over the past 5 years investing in Real Estate looks very promising.
Current market value 5 year value projection
Detached homes $855,000 | $1,290,000
Semi detached homes $668,000 | $1,075,000
Attached homes $752,000 | $1.250,000
Condo townhomes $592,000 | $1.080,000
If these projections sound crazy, remember the average detached home in Oshawa sold for $360,000 10 years ago.
If you are interested in purchasing a rental property, a first time home or downsizing I can be reached at lindsay@buyselllove.ca or 905-743-5555.Connect with us on Facebook, Instagram, LinkedIn and YouTube.