Real estate is now a core part of Toronto’s prestige. The good news that any investor would want to hear from high housing prices, ever-rising home sales, more potential property buyers, you name it, has already been published about this city.
Real estate forecasts even take things to a whole new level. Toronto is now a real estate capital, promising more stable rates and super great returns in the coming years. Homeowners and investors have expressed more confidence in its potential. More people are migrating into the city, hoping to also enjoy all the good things it has to offer
Right now, there are a variety of investment options if you want to have a slice of the city’s healthy real estate market. Each has its unique characteristics, benefits, and drawbacks. In this article, I’ll be looking deeper into the five best real estate investments in Toronto that have great potential to grow your wealth.
What to Consider Before Investing in Real Estate Toronto
Even the best real estate investments in Toronto would still require due diligence. Without knowing aspects such as taxation, finance, and timing in detail, you will find yourself making costly decisions with the potential to completely ruin your opportunity to gain real estate wealth.
Top on the list is financing. Toronto has plenty of brokers and lenders ready to discuss your mortgage needs and offer you a perfect solution. However, note that acquiring a mortgage for that investment company won’t be as easy as borrowing for your primary residence.
For a start, you’ll need to have at least 20% of the property buying price set aside as your down payment for a residential property. Commercial property investments attract a down payment of 50%.
In Canada, the money you collect as rent qualifies as income. Thus, it will be subjected to income tax. The tax implications will vary based on your residency status and type of property. If you are a non-resident, there will be a variety of taxes you will be subject to.
On top of that, you may incur extra fees and charges associated with your activities and transactions. So, if you have plans to acquire investment property here, consider consulting your accountant.
Evaluate Your Investment Goals
Real estate is diverse. You can buy, sell, flip, or rent out the property. Deciding which option to opt for should begin by analyzing the ins and outs of short- and long-term investment strategies.
Expecting to profit in a short period of time could be risky and unguaranteed, partly because of the unpredictability of the real estate market. Longer-term investment goals, on the other hand, carry fewer risks and more potential.
You will also want to consider ownership, property features, the tax implication of each, and your financial situation as you evaluate your investment goals.
What Are the Best Real Estate Investment Options in Toronto?
In Toronto, these five investment options have time and again demonstrated an ability to generate great returns, plus each has special characteristics that make it attractive to just about any investor. Let’s take a look:
Ever wondered who owns the amazing condos you see in the ever-changing Toronto landscape? The answer might surprise you. Roughly a third of Toronto’s Condos are owned, bought, and sold by investors. Actually, there is so much more to condos than their beauty.
To begin with, they have fewer maintenance costs and repair work. Next, a good investment condo will easily break even with a 20% down payment. What’s more, condos that are highly unique and strategically positioned in good locations are sure to appreciate value with time. In the long term, this could turn into a solid investment as the value increase will bring good returns.
However, as an investor, you need to be aware that condos also have limitations, the major one being they work better as a long-term strategy. If you have short-term goals for investing in real estate, condos may not be a good idea.
2. Income Properties
Income properties are those houses that come complete with attractive self-contained apartments. They are known to be great deals in the world of real estate.
This kind of property tends to appreciate faster than condos, partly because people have a hard time envisioning paying a higher price for a property where they have to pay condo fees as well. Many homebuyers would rather put that money into home improvements of their own choosing. But, if you’re looking to make money when you sell, an income property may be a safer bet.
Also, there are no external restrictions on its use. Condo Bylaws and Rules may limit how you use your property and make it difficult—or even forbid—renting it in some cases, such as short-term rental.
Nevertheless, income properties do have their own drawbacks too. If you’re occupying one of the units yourself, you’ll have to endure the noises and smells of your tenant. You will not have the privilege of enjoying privacy.
Then there’s landlord nightmare: repairs and maintenance, renovations, non-paying tenants, etc. Also, leasing may make it difficult for you to dispose of your property when the right time comes. Not forgetting to mention the complications with the legalities associated with apartments.
No matter the level of stress and frustrations home renovation work carries, you’ve probably considered flipping a house. Unfortunately, the reality of flipping houses for profit isn’t quite as simple as lots of us like to imagine. If you want to do it in the long run, then there’s a lot you will want to be aware of:
- Do the math. Go beyond determining the fair market value. Find out the cost of renovations, selling, taxes, capital gains, carrying costs, etc.
- Property worth. This is a key factor in deciding what property to purchase.
Other factors to consider are:
- Target buyer
Flipping can bring you great returns if you do it right. The secret to successful flipping begins with you being aware of all you are doing.
One of its major drawbacks is that there are no guarantees. Of course, it has worked well for some individuals, but not everyone is lucky to leave with a profit. Also, it’s time-consuming. You’ll be managing your workers, keeping timelines, staying up to date with the progress, and so on.
4. New Constructions
This option was once common in Toronto. Investors would buy pre-constructed condominiums and then dispose of them after they complete the building work. New constructions tend to be beneficial in many ways.
Most of them today are normally constructed in nicer strategic locations. Such areas attract quality tenants, and that’s a major plus. Also, you have the chance to make the construction suit your specifications.
Compared to a resale condominium, the latter is cheaper. Also, prepare to incur extra construction costs like hiring builders and contractors, etc. There’s also the risk of builders bailing out on you by abandoning the project and then tying down the payments.
5. Mixed-Use Property
As you probably know, this is an option that comprises both commercial and residential sections. They are a preferred option in areas that are more dense and compact. Unlike other investment options, this one tends to have a higher earning potential, especially if it’s located in an upcoming neighbourhood.
Toronto’s real estate market clearly has a lot to offer investors looking to tap its potential. The trick to identifying the gaps and opportunities in this market is to assess the viability of all the investment options discussed above.
And other than finance, taxation, and investment goals, also base your choice on your current budget and interests. Generally, let this be your foundational guide to finding the best real estate investments in Toronto. You can always learn more about this market by consulting with experienced investment consultants.