The higher up in a condo building you are, the nicer the view can be. But is the view worth it?
It is general knowledge that the higher up a person is looking to purchase a condo, the higher the price will be (especially with an average of $1000/floor premiums). Condo buildings are interesting as each floor is built with similar unit designs (if not the exact same design) with the only substantial difference being the view. It is no secret that any view is more impressive the higher a person is, and this plays heavily into the price that renters/buyers are willing to pay for a beautiful view.
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The high floor condo vs. lower floor condo debate has long been waged. Ideally there are a number of rules that those in the real estate industry maintain about this comparison. For example, higher floors do generally get higher rents. It’s also no secret that, to the vast majority of buyers, the higher a condo is, the better. Also, the higher you go, the larger the units tend to be sometimes up to three bedrooms and higher.
When buying a condo in a premium Toronto neighborhood such as Liberty Village, there are several considerations that need to be made including location, in-building amenities, and other questions that you may have such as “are pets allowed?”. If you’re making a condo investment, the floor that it’s on should be just as important a consideration as any. Many real estate agents will tell you that buying on a higher floor is better than on a lower floor but if that’s not within your budget, a lower floor condo in a strong location or a highly reputable building can be just as valuable.
There have been a number of studies performed on various condominiums in the Toronto area to see if there is more to gain from being on a higher floor than just a lovely sight. Through extensive compare and contrast analysis, it was discovered that there are a few gains to be had when purchasing a high condo. The first is the resale value. It is easier to market a higher condo because people often prefer to be looking over more of the city rather than into another building across the street. The big ‘however’ with this is that not everyone can afford to pay the premiums and it could take longer to actually find a buyer. Once you do, it will be for a nicer price than the guy ten floors down though.
The initial investment that will be put into a higher condo will in time pay off due to the cap rate. A capitalization rate is the amount of money that will be generated off of the operating income of the condo based on the current market value. In other words, it is possible to obtain a high cap rate on a property if the estate investment brings about a high return income. Cap rates will increase as you go higher up in floors. So a higher floor will obtain a higher profit for the investor.
These factors play heavily into condos that offer better views for those who are higher up. It becomes more profitable for an investor to purchase a condo in a building that can offer almost the same views for many of the floors without much variation. The floor premiums will be lower for the lower floors but the investor can still profit heavily because the market value is increased due to the view that it offers.
Lower floor investors will see a profit sooner than those who are higher up in floors, but those who invest in a higher condo will receive more money over time.
So, is it more valuable to buy a condo on a higher floor? In the long term, yes, the condo will be of higher value to you. But if you wish to make a profit quickly, a high floor condo may not be the way to go; value is all in the eye of the beholder.