Toronto’s real estate market has been hot. And just when you thought the high house prices and the skeptics predicting a bubble burst would slow it down, the opposite happens.
Demand for housing has been stronger than ever, fueled by a strong economic base that continues to lure workers and their families into the city, thus creating a need for housing.
Almost every day carries stories of daring real estate investors and homeowners who have made massive equity and capital gains or fetched decent profits from properties they bought and sold in the midst of all these noise and goofy headlines.
So, if the question you have been asking yourself is if buying a rental property in Toronto is worth it, my answer is yes. In fact, I’ll dissect this market today and show you all the sides of it you will want to know, including the benefits and drawbacks.
Why Would Anyone Want To Buy Rental Property In Toronto?
Far from what I’ve just mentioned, there’s more to Toronto’s real estate market that you are probably not aware of.
Predictable Equity Gains And Incomes
MoneySense reports that renting your property in Toronto will see you enjoy a rent increase of 13.39% in a span of five years. That aside, the annual ROI within the same period stands at 6%.
Condo prices have also been rising in the years leading up to now. TREB data shows a 52% rise since 2015. That means that those who bought property(s) then stand to make gains exceeding half of their initial investment. You could even make better returns if you refine your condo investment strategy.
Note that marketing your condo can be tempting because everything tends to look so promising on paper or online. To avoid making mistakes that could cost you dearly, seek expert help, particularly that of an investment consultant.
High Demand For Rental Property
Not too long ago, HuffPost shared data from research by scholars based at Ryerson University, which found Toronto to be the fastest growing city, not just in Canada but in the US as well.
Experts have interpreted this differently; some predicting a housing crisis and others a boom for real estate investors. Think about it this way:
Rent prices are already great in this city and they have been predicted to increase in the coming years. If you are paying for the property through a mortgage, that means you will have enough cash flow to foot your mortgage. The scrapping of rent control has also worked to the advantage of landlords.
Gains and incomes, together with high demand, take the front line when it comes to evaluating why anyone would want to buy rental property in Toronto. The other reasons include:
- Toronto’s real estate market has experienced steady growth and stability in the face of predictions of doom.
- It’s a safe, friendly, and economical city. Toronto has actually earned top spots in rankings that list cities based on safety and security, ease of doing business, democracy, friendliness, and cultural diversity, among other aspects. All these factors make more people consider living in the city.
- You get to pay fewer taxes as a landlord. Property expenses such as insurance, management fees, property taxes, utility bills, etc. can be subtracted from your rental income. Also, if your operating expenses exceed rental income, the difference can be deducted from other income sources you have.
- Plenty of expert help, mostly from property management companies, is ready to cater to all your needs and ensure you go about this entire process right.
- Toronto boasts a huge line up of lenders ready to discuss financing options with you. The only challenge here is choosing the right lender.
The Drawbacks Of Purchasing Rental Property In Toronto
The majority of challenges you’ll face while buying a rental property in this city aren’t so different from what you would face in most of the healthy real estate markets out there.
Financing tops the list. If you are a foreigner, you may need to pay a huge down payment, usually 20% of the buying price for residential properties and 50% for commercial properties.
Property management is another challenge. For foreigners, the experience can be overwhelming. Generally, it requires a lot of hard work and commitment, with tasks such as accounting, finding and screening tenants, property maintenance, and rent collection requiring extra skills.
Just like in most real estate markets, you will also have to be extra patient if your investment goal is to buy and sell property.
Tips For Buying A Rental Property In Toronto
Real estate markets are known to be volatile and Toronto’s is no different. Whether you are a beginner or seasoned investor, you will need solid information about the market and more importantly, a proper strategy that will see to it that you navigate it properly.
Now, let’s have a look at a few things you will want to keep in mind before making that purchase:
- Understand the investment goals and options at your disposal. Do you want a property that will bring you positive cash flow or are you looking to make capital and equity gains?
- Evaluate your budget and take note of closing expenses. These two factors will guide you in finding a property that suits your needs and situation.
- Understand the tax implication of all the property types at your disposal and what you are subjected to as resident or non-resident.
- You may want to consider a long-term strategy, mostly because of the promising equity gains. Besides, you get to be free from realtor fees that accompany buying and selling and also the land transfer tax, both of which could take a big slice of your ROI.
- In Toronto, buildings owned by reputable developers tend to historically have more potential for appreciation.
- Consider the location. Learn as much as you can about the different locations and their real estate potential.
But that’s not all. I would suggest that you spare some more time to speak to a property management professional about real estate investing in Toronto.
Renting, flipping, selling, or buying a rental property in Toronto are no doubt great investment ideas. Either of these decisions could turn you into a happy and successful real estate investor. Just make sure that you have taken your time to familiarize with the market before arriving at the decision. Where you get stuck, let us help you.