Toronto’s real estate market is considered to be an excellent source for buyers and investors. Many investors head towards Toronto to profit from buying, renting and selling the properties in Toronto. The following are the various options that will help you make money in Toronto’s real estate market.
Basics of Real Estate Investments
Financing – It is easy to borrow for primary residences but getting a mortgage for a second property is quite challenging. You need to pay 20% for a down payment of the property price. As well, around 50% of the rental income will be taken into consideration to qualify you for a mortgage.
Taxation – In Canada, rent is considered as income and subjected to regular taxation. The increased value of the property from the time it becomes an investment property until the time it is sold is subjected to capital gains taxes. Thus, it is advisable to understand the tax implications completely before buying an investment property.
Timing – Real estate investments generally have longer-term objectives. This is due to the fact that the real estate market is unpredictable and it is unreasonable to expect profit in a short period of time.
Investment Options
Investment in Condos
Investors are constantly buying condos and changing Toronto’s landscape. Here are the pros and cons of buying condos:
Pros
- Good condo investments require 20% down payment to qualify for a mortgage
- Cash flow and increase in property value over time
- Finding a good tenant is easy
- Unique condos get more appreciation than the stock market
Cons
- The statutory regime governing tenants and landlords, the Residential Tenancies Act have brought lots of obligations for landlords. So, investors need to accumulate all the relative information prior investing and becoming landlords.
- Requires a lot of time and energy
Income Properties
Income houses having self-contained condos are considered as ‘HOT’ commodities in Toronto.
Pros
- A basement apartment that you can rent out can make a huge difference in financing your dream home. Depending upon the current interest rates, your rental income can cover a significant amount of mortgage.
- Generally, houses tend to appreciate in value higher than condos. So, for investors, income property can be a safe and profitable bet.
- You should be able to equalize or be cash positive with a 20% down payment on multi-residential houses.
Cons
- If you do have tenants, you may have to deal with noise or payment issues.
- It may be a little difficult for you to sell the home if you have tenants in leases.
Investing in Short-Term Condos
Many investors have started investing in condos for a short period of time rather than following the 12-month traditional tenant route.
Pros
- Short-term rentals allow almost twice the amount of rent of regular tenanted apartments.
- There are no terms and conditions and obligations on landlords
- It provides hard cash flow and price appreciation
Cons
- You might be breaking the condo by-laws if renting the condo for short term, as many building have a minimal time requirement of 6 months
- You may bear extra maintenance costs plus start-up and wear and tear costs
- The short-term strategy is really only best suited in 5 star locations (ie. having hospitals, universities nearby)
- Most of the finance providers might not consider the rental income from short-term condos
- It takes a considerable amount of time to manage a short-term rental
New Construction
This is one of the ideal ways of making money in Toronto’s real estate market. Investors buy condos during the construction phase and sell them when they are completely ready.
Pros
- Investors can choose the prime locations and units
Cons
- Nowadays, it is quite convenient and cheaper to buy a resale condominium.
- As the real estate market is unpredictable, your new construction could be worth less at the time of possession.
As an investor in Toronto’s real estate market, you need to consider a lot of things to get a successful deal. We, at Nanda & Associate Lawyers, give our clients reliable information of real estate laws to help them get the best deal at good prices. Our real estate lawyers are well-aware of the local real estate and condo rules, and will easily help you understand the relevant Ontario real estate laws.
