Toronto is the real estate capital of Canada, and many aspiring investors have their eyes on the city. By 2020, one out of every five homes was owned by investors, primarily individuals rather than corporations. When you look at who is purchasing the bulk of newly built homes, investors make up nearly 40% of the new owners. In 2021, 25% of new property purchases were by those who were already homeowners.
Why are so many people investing so heavily in Toronto? The ability to see the writing on the wall is one trait successful investors share. Just think: Over 105,000 people moved into Ontario by the second quarter of 2022, and approximately half of them settled in Toronto, which already has a population hovering around 2.7 million.
A Growing Population Translates into Growing Demand
Statistics Canada estimates a 2.3% population growth for 2021. This means approximately 62,000 new residents are moving to Toronto from other towns, provinces and abroad.
Considering Toronto offers one of the best career markets anywhere in the country, those numbers are not likely to decrease any time soon. Some of these newcomers to Toronto will buy a home. However, most will end up renting.
Want even more detail on how you can grow your equity through real estate? These resources should help:
- How to Succeed as a Toronto Real Estate Investor
- What Renovations Really Add Value to Your Home
- What You Need to Know About Buying and Selling on the Waterfront
Investors Have an Excellent Sense of Timing
Successful investors know whether to bide their time or take action. With the recent changes in the Toronto real estate market, the time to invest has never been better. Why? There is a desperate demand for places to rent, and the city is not keeping up with the supply.
Have you ever noticed how few “For Rent” signs you see when driving around? According to the latest report from Urbanation, vacancy rates in Toronto fell to 1.4%. This is slightly better than the 1% vacancy we saw at the start of the pandemic, but the demand is critically high. Investors are finding very little difficulty in securing tenants for their income properties.
Tight supply also means rents are higher, making it easier to cover the cost of financing your investment. By April 2022, condo rent prices were up 15% year-over-year, the fastest growth since they started tracking in 2010.
Keeping informed on recent changes to the market is one way to get your timing right. Sign up for our newsletter here.
What Makes Toronto Perfect for Investors
One of the biggest reasons the rental market in Toronto is in such demand is the high housing prices. Values have come down in recent months. However, the average cost of a Toronto home sits at just under $1.1 million, putting homeownership off the table for many residents. For current property owners with equity, purchasing a home is far more accessible.
Rising interest rates are another reason for the booming rental market. The higher the rate, the higher the monthly mortgage payment, with more going to interest than the principal of the loan. Here again, investors have the advantage.
By borrowing against the equity in your current home, you can often access financing at much lower interest rates than a first-time buyer.
Smart Investors are Knowledgable about the Market
Many factors contribute to your potential success as an investor. Access to capital and financing help, but money isn’t everything.
Savvy investors dive deep into their research before committing to a purchase. The market might be booming as a whole, but every neighbourhood is different. Some areas make better investments than others. Here are a few steps to take before making any significant decisions:
- Knowing the value of houses compared with the average rent price in the neighbourhood to determine whether you can generate enough cash flow to hold the property.
- Calculating how much funding you have in reserve to ensure you can cover the monthly costs of the property, including maintenance, marketing costs, and any time the unit sits vacant.
- Having a plan to find high-quality tenants that will take care of the property and pay rent on time.
- Understanding your rights and responsibilities as a landlord, as well as the rights and responsibilities of your tenants. You can find the Residential Tenancies Act of Ontario here.
Finding the right home is always challenging, whether it’s for yourself or a rental property. Find out more about our detailed process here.
Success Depends on Your Network
Success is rarely a one-person game, especially when it comes to real estate investing. One thing you will find amongst all affluent investors is that they never try to go it alone. They have worked to develop relationships with other experts who can step in to help at any time. Experienced real estate agents, mortgage brokers, lawyers, mentors, business partners and contractors are all a phone call away.
The Number One Attribute of Successful Investors in Toronto
Buying an income property in Toronto is one of the safest and most profitable ventures you can undertake. Still, it’s not a way to get rich quickly. Investing is far more involved than popular television shows make it out to be.
Many aspiring investors who sought to buy and flip a house are struggling now, particularly as inflation drives up the price of materials and labour. It’s hard to succeed in the short term in this shifting market. The days of fast profits may be permanently behind us.
As such, you could argue that the number one attribute of all thriving investors is patience. Those who think ahead and are committed to the long term have an excellent track record for success.
Are you ready to dip your toe into the Toronto market? We specialize in the area and are happy to help you get started. Book a free, no-obligation meeting with us below.
