When it comes to investment opportunities, Toronto real estate is hard to beat. Rental units here are always highly desirable, especially with the high price of houses. Strangely enough, rental costs have increased even though property values have decreased over the last few months. If you’re in the position to buy, the time is now, while prices are down.
As more immigrants arrive and young professionals flock to the city in search of opportunities and excitement, we expect that the demand for housing will quickly outpace the supply. Are you ready to take the plunge and buy a Toronto investment property? Here are a few things to consider.
Types Of Real Estate Investments
Toronto offers a diverse real estate landscape, and you’ll find plenty of opportunities to invest. Here are just a few:
- Buy a condo to rent out. The demand is great, especially in downtown Toronto.
- Are you upgrading your house to a larger one? Keep your current home instead of selling and use it as a rental property.
- Buy a home with a secondary suite. You can kill two birds with one stone by finding your dream home and renting out part of it. The best part? You may be able to qualify for more financing because you can include potential rental income in your mortgage application.
- Build a secondary suite in your current home. If you have no plans to move, building a secondary suite may be the easiest and fastest way to get started as an investor. A basement apartment, attic suite or even a garden suite are excellent opportunities to generate income and add value to your home.
The changing market is creating challenges – and opportunities. Here are some articles that will help you achieve your goals:
- Upsizing In Toronto? What You Need To Know So You Don’t Overpay
- Another Interest Rate Hike? What Will Happen To Toronto Real Estate Prices?
- Misconceptions You May Have About Toronto Real Estate
The Benefits of Investing in Toronto Real Estate
The most obvious benefit of owning an investment property is the passive income it generates. Passive income is money you don’t have to trade time or labour for, making it one of the best ways to increase your net worth.
However, the benefits of owning property go far beyond the extra income.
Your equity will grow as you pay down your mortgage and as the property appreciates in value over time. Increased equity gives you more purchasing power, which you can then use to fund more investments. Equity investments are one of the tools of the ultra-wealthy.
Owning real estate gives you a sense of financial security like nothing else. Having an extra stream of income does wonders for your peace of mind. And if you ever need an influx of cash, you can sell one of your properties.
After a few years, new opportunities will open up to you that you would never have had without your initial investment.
- You can decide to keep the property and keep growing your equity as it rises in value.
- You can sell the property to fund your retirement or other investment.
- You can gift the property to a family member to create generational wealth.
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The Challenges of Real Estate Investing
Financing
For many, financing an investment property is the biggest hurdle. Toronto housing is expensive, and you need at least 20% for your down payment on a non-primary residence. Where does this money come from? If you currently own a home, it can come from your equity.
You can apply for a Home Equity Line of Credit (HELOC) or a Home Equity Loan (HEL) to fund your down payment. Once your unit is rented, the rental income should cover all or most of the monthly payments.
Finding and Managing Tenants
Finding a tenant and maintaining the property are two other significant challenges of owning an income property. There is no landlord to call when there are problems to deal with. You are the landlord, and you’ll have an obligation to keep the unit in good condition for your tenant.
If you don’t want these headaches, consider hiring a property manager. They will handle all aspects of the investment for you, from finding the right tenant and chasing down rent payments to fielding the 2 a.m. calls.
Nothing helps you succeed more than being armed with the facts. Read our FAQs from both buyers and sellers:
Other Considerations You Should Know About
As we’ve mentioned, the upsides of investing include extra income and growing your net worth. The downside is that your taxes are about to become more complicated. You’ll want to work with a financial expert who will help you reduce your taxes by finding every possible deduction you might be entitled to.
Now is a good time to start organizing your receipts, and maybe even begin keeping digital copies of everything. You’ll also need a comprehensive insurance plan to protect your house from unforeseen damages and safeguard yourself from lawsuits.
And, of course, keep in mind that if you ever decide to sell your investment property, 50% of your profits are subject to the capital gains tax.
Investment Success is a Team Effort
You may decide to operate as a sole proprietor, but succeeding as an investor is never a one-person job. The more experts you have on your side, the more stress-free and profitable your investments will become. Here are a few professionals you’ll want to have at your fingertips:
- Local real estate agent
- Real estate lawyer
- Accountant
- Property Manager
- Electrician
- Plumber
- Dry waller
- Painter
- HVAC contracto
Great Neighbourhoods to Invest in Right Now
Perhaps the most critical component of your success is the location of your investment. The more desirable the area, the more you’ll have high-quality tenants lining up to rent your unit.
Although every neighbourhood in Toronto is growing, here are some of the best areas to watch out for:
- City Place – the largest mastermind community in Toronto, surrounded by beautiful greenery and exciting attractions, and the home of Harbourview Estates.
- Leslieville – a beautiful family-friendly neighbourhood.
- The Beaches – located close to some of the best beaches in Toronto. You just might be tempted to live here yourself instead of renting it out!
- Downtown Toronto – it’s hard to find a better investment than a condo in the centre of it all.
Want to explore more great neighbourhoods to invest in? Check out all of our community guides right here.
Do you have questions about getting started as a Toronto real estate investor? We offer free consultations where you can discover everything you need to know and more. Book your meeting with us below.
