If you can buy, why rent? That’s a question a good number of people grapple with where real estate is concerned.
Maybe your reasons for wanting to buy a rental property have to do with the fact that you plan to settle in Toronto sometime in the near future; or you moved away, probably because of career opportunities or business commitment, but what’s really in your heart is to buy property in Toronto, or you want to make some profits from the real estate market.
Whichever your situation, there are two sides to this decision; this article aims to familiarize you with these.
But before we get to that, there’s an aspect you may want to be informed about: residency.
Does My Residency Status Matter?
Yes, it does. The scenarios surrounding buying a home in Toronto as an investor can be varied in terms of residence.
For the most part, it usually boils down to two scenarios: You are either residing in Toronto as a permanent resident and looking to buy property, or you are out of the country on a work assignment but still looking to invest in a piece of real estate right here in Toronto.
Both situations require a special approach, and at this point, you will want a professional expert voice that answers your questions and concerns from a position of strength, experience, and vast current knowledge of the real estate market in GTA.
You may also have concerns regarding market trends and return on investment should you opt for real estate investment in Toronto. Well, that’s yet another reason to look for solid owning-rental-property-tips and, more importantly, enlist the help of a good property management company.
That said, let’s now explore the pros and cons of buying rental property in Toronto.
Pros and Cons of Buying Rental Property in Toronto
The benefits of purchasing a rental property may be few, but they are absolutely powerful if everything works out well.
Predictable Monthly Income
Investing in a property in Toronto might mean you might be residing on the property or not. Either way, there’s still something to gain. If you opt to rent it out, you will be guaranteed a direct income stream, whether it’s occupied for the entire year or just a portion of it. This makes buying an excellent option if you are looking to diversify your income sources or create additional financial security during retirement.
Income From Growth In Property Value
If you opt not to rent out your property, the property’s value can still grow in the long term as you automatically become a homeowner. In some cities, such as Toronto and Vancouver, increased demand for real estate property has been fueling prices. Also, there are other profitable ways to increase the value of your property as well. We have all heard of weekend warrior renovation jobs talked by homeowners to update a washroom or kitchen. These kinds of jobs tend to increase home value.
You Pay Fewer Taxes
As a landlord, you can significantly reduce the taxes you owe the government. This is because certain property expenses, including but not limited to property taxes, insurance, management fees, maintenance costs, utility bills (when included in the rent), and mortgage interest, can be deducted from your rental income. And if income from your rental property is lower than your expenses, the difference or loss can be deducted from any other source of income you have.
Availability Of Professional Help
If you are an international or resident investor, there are good property management firms poised to guide you through the process of buying a rental property. This ranges from investment consulting and determining your investment needs for suitable recommendations to offering deep insights on financing your purchase through securing a mortgage, as well as legal, insurance, accounting, and taxation advice on buying and renting a property.
Also, if you have no time to conduct the day-to-day engagements of a landlord in relation to your property, such as finding tenants, rent collection, maintenance, and so forth, a property management company can relieve you of these tasks while making sure that your ROI is on track for the long haul at a nominal fee.
Financing and Costs
In Toronto, you might need at least US$25,000 in order to break into the real estate business. Though not compulsory, you might also need to reserve extra thousands of dollars, just in case problems come up.
There’s also the financing aspect. Financing your purchase can be difficult as a payment of roughly 20-35% of the total cost of the property is required upfront, in addition to a 90-day verification period on the source of funds.
Is it the best way to own rental property? You can talk to a financial expert.
Although valuable, selling a rental property when you are ready can be quite difficult as real estate is not a liquid asset and may take considerable time, depending on market conditions. There’s also the task of negotiating deals and finding a proper realtor.
Management Can Be a Problem
Without the help of a property management firm, managing the property can be a challenge, especially if you are abroad on a work assignment or in the country but too overladen with other activities such as work to keep up with your property needs, such as maintenance, rent collection, and finding long-term tenants.
Finding the Right Partner
In general, purchasing a rental property(s) in Toronto can become a whole lot easier if you find a trusted partner who understands the market thoroughly and the legal aspects involved in purchasing a home with respect to an investor’s unique situation.
A typical investment cycle, irrespective of whether you are a resident or non-resident, will involve finding and buying a property in Toronto, having the property in your custody for a time as it appreciates and accumulates equity, then offloading it at the opportune time.
A property management company whose core values are based on integrity and commitment will walk you through the process of identifying properties that fit your investment needs while also guiding you with expertise on the legal side of things that will help make you a bonafide property owner in GTA.
Buying a rental property in Toronto can be a brilliant idea and sound investment if you are in great financial shape, are looking to diversify your income sources, and don’t mind enlisting the help of a Toronto property management company, especially if you are too busy to take care of the property or far away from it.
But if you are not ready to face the risks and financial implications that come with it, the liquidity issues, and the rest of the challenges we’ve seen in the pros and cons of buying a rental property, then the idea might not be right for you.