Apartment-style condos in Kitchener-Waterloo

admin | Feb. 20, 2017

Condos for Sale in Kitchener-Waterloo!

I’ve been a huge believer in the downtown Kitchener and Uptown Waterloo areas for about 5 years now. Since 2012, momentum has been building in these areas and it looks great. The LRT has been a catalyst and re-urbanization is taking a foothold.  I’m very excited about King Street and can’t wait for it to re-open.


Condos are helping the downtown areas as they create tons of living units in a small area. This density of people is great for business in the immediate vicinity of those condos. Restaurants can now count on foot traffic and business models now start to be profitable. Restaurants start to open. Dry cleaners start to open. Boutique clothing stores, coffee shops, and all kinds of retail stores start to open to cater to the increased density of people. This investment by these stores increases the draw to the area and creates a desirable streetscape.

Our Local Market

Arrow Lofts in Kitchener
Arrow Lofts

KW real estate has been on a tear for about 14 months now. Prices are up across the board. There has been a surge in sales. Buyers from larger Canadian and international cities are buying properties here because values and price points are within reach, versus prices in places like Toronto where the average single detached home price is now $1.34M. Investors are buying properties in the lower price range as rental units to cater to the increase in refugees and immigration.

Mortgage rules are also forcing buyers to either continue to rent or to look at homes in a lower price bracket – the increased minimum down payment rule over $500K and the stricter approval rules using the Bank of Canada posted rate are two of these changes. The municipal land transfer tax in Toronto is also a reason buyers are looking outside of the city. Foreign investment rules in BC have also caused international buyers to look towards South Western Ontario. Investors from China love Waterloo – their kids can attend school here and they can invest in real estate in a safe environment. All of these reasons, among others, have made it next to impossible to buy a semi-detached, townhouse or single detached home under $400,000.  What this means is that condos are becoming the only option given price points of between $225k and $350k.


I believe that apartment-style condos are going to really start benefiting. They have lagged behind the rest of the market. I believe this is due to decent supply, buyers waiting for the LRT to get up and running, and a mindset in KW that is still adjusting to the condo lifestyle. This is going to change and condo prices have already started to rise.

Condos for sale in Kitchener-Waterloo
The Grand at Waterscape

Investing in Condos – the numbers!

I wanted to touch base on investing in condos:


Our example is a two bedroom condo listed at $325,000.

Rent for this unit would typically be $1650 per month.

Here is how an investment is this property would work.


$325,000 purchase price

20% down payment: $65,000

Monthly mortgage payment (2.9%, 5yr fixed, 80% LTV, 25yr amort): $1217/mth

Condo fees: $554/mth

Taxes: $230

Total monthly cost: $2001/mth


Based on the rent you can get for this unit you would be cash flow negative $351/mth

This means that you would have to contribute out of pocket to cover the monthly expenses. Essentially what you are doing is adding to your initial investment of $65,000. So at the end of year one your contribution would be $65,000 + (12 x $351): $69,212, at the end of year two: $73,424, etc.


Now, an investment like this is not always a bad thing – if the building is appreciating quickly then the money you are making on the unit will overshadow the extra contributions you are making.  Also, you can increase rent by 2-3% a year and eventually you would be cash flow neutral and then positive.

The Future

So let’s project what this investment would do over 25 years:


We’ll assume an average appreciation of 3% to be conservative (right now we are clipping along at about 13%). In 25 years at 3% your $325,000 condo would be worth $680,000.

In this scenario you have turned your $65,000 initial investment into $680,000 because your mortgage has now been completely paid off. Given the rental profile of this unit, you would also need to contribute until rent catches up with your monthly cost which would happen in about year 8 adding $33,700 to your investment input. So you’ve turned $98,700 into $680,000 in 25 years. What’s your return? 8.03% compound annual return.


Now, imagine the property was cash flow neutral and your initial investment stayed at $65,000 – your compound annual return is almost 10%. It definitely pays to look for a better unit than the one in our example.


Why I like investing in real estate

Global events and mandates by governments around the world need inflation to keep economies moving in the right direction. We all know about the money being printed over the last 8 years in hopes of keeping money cheap and easy. I think it’s clear that money is cheap at about 3% – and quantitative easing has probably worked. But, when does inflation happen? When money is cheap for extended periods of time and access to that money is easy, people keep borrowing and chasing assets. This creates competition that makes prices rise.

Condos for sale in Kitchener-Waterloo
Harvard Place


When prices rise your cash becomes worth less and your assets become more valuable.  In this environment you want to borrow money cheap and hold safe assets that can pay for themselves.

You want inflation, but you don’t want to be affected by interest rates that will have to rise to keep inflation in check. Rental properties do just that – you can borrow money cheap, lock in at a great mortgage rate, buy an asset that will benefit from inflation and have a tenant pay your bills… GENIUS.

Also, having an asset that is increasing in value allows you to access capital if you need it.  You can sell the property OR you can simply refinance the property to 80% of the new, inflated value.

Example: If a property is worth $300,000 today you will have a mortgage of $240,000. When the property goes up $100,000 in 5 years you now can borrow 80% of the new $400,000 value.  Your mortgage principle will reduce by about $5000 a year so your mortgage balance is $215,000 – this means if you refinance you can still hang onto your property AND pull $105,000 out ($400,000 x 80% is $320,000 less your mortgage balance of $215,00).  I love this for two reasons – first, that you have access to cash and second, you can use that equity to put a down payment on a new property without drawing on personal funds.


There aren’t many investments that are safe, where you can access huge amounts of margin, and that will return 10%


Condos for sale in Kitchener-Waterloo


  • This field is for validation purposes and should be left unchanged.