Historically speaking, real estate has always been considered one of the most profitable and stable investments you could ever venture into. Toronto, in particular, represented a great opportunity to get into a dynamic market with substantial returns over time.

Over the last few years, Toronto real estate has become more intimidating, with rising housing prices and high interest rates making it more challenging across the board. 

These conditions may be the new “normal.” As we all try to adjust, some of us are wondering if now is a good time to get back into real estate investing. Let’s explore a few of the possibilities in more detail.

Sooner Is Better (Mostly)

Long-term equity gains are the name of the game as a real estate investor in Toronto. Prices can and do rise and fall month by month, but housing always increases in value over the long term. That’s why those who bought their Toronto homes a decade ago are typically in a much better financial position than those looking to get a foot on the property ladder. 

That said, there is no one size fits all. Whether the time is right for you depends on your resources, expertise, and your ability to ride out the tough times. For example, let’s imagine two different people each decide to buy an investment property this month. Each individual believes they will find a tenant to cover their carrying costs quickly. Unfortunately, it takes a little longer to find someone than either investor anticipated. However:

  • Investor A has a substantial financial cushion and has been through this process before. While they would prefer to find the right tenant immediately, they can manage the carrying costs in the meantime. 
  • Investor B has sunk all of their resources into the property and was counting on immediate income to carry them through. Investor B cannot hold the property vacant for long and may have to cut their losses if things don’t turn around. 

Timing Is Personal

In the above scenario, the timing couldn’t be better for Investor A. Plenty of inventory is available in the current market, especially when it comes to condos. In addition, buyer activity is slow, which means less competition and better profit potential. If you’re in a position to buy now, you can take your time to find just the right place. 

Having a little extra negotiating power could also help you secure the unit at a price where it’s possible to break even or generate positive cash flow. Though conditions may be ideal, Investor B might still be wise to hold off, or at least obtain professional guidance as to what to do next. 

Knowledge is essential when investing in Toronto real estate. The resources below will help you make informed decisions:

Types of investments

Toronto real estate offers many opportunities, some which will require more experience and capital than others. Beginners or intermediate investors might decide to get started with the home they already own.

Secondary Suites

If you’re not quite ready to buy a second property, you can start by generating income from your current residence. For example, is there a basement or upper level that could readily be turned into a secondary suite? This could be the least expensive way for existing homeowners to invest with minimal risk. If all goes according to plan, you might even decide to expand your portfolio by building a separate garden suite right on your property.

Finding a house with an existing secondary suite is a great way for first-time buyers to enter the market, both as a homeowner and a real estate investor! You live in one unit and rent out the other, and the rental income will help you cover maintenance costs and your monthly mortgage. Plus, many lenders will provide you with more financing when you’re buying a home with income potential.

Condos

The influx of condos on the market represents another excellent opportunity for more serious investors. Toronto has an almost insatiable demand for rental units, especially with the number of students and young professionals coming from out of province and overseas. 

With such a vast pool of qualified tenants, finding the right fit for your unit won’t take long. In addition, a lower purchase price means less of a down payment is necessary, which could make it easier to obtain financing.

Multi-Residential Units

For maximum investment potential, you might consider looking into multi-unit dwellings. Duplexes and triplexes may seem more intimidating, but they actually allow you to generate income from multiple individuals.

If one tenant is late with their payments, you have at least one other to help you carry through. Having multiple streams of passive income is one of the best ways to minimize your risks.

Intrigued by the thought of using your primary residence to generate income? You may enjoy “Do Laneway Houses Add Value To Your Midtown Home?“

Assignments and Pre-Construction Opportunities

Should you consider getting in on the ground floor with a project that is still in development? Toronto is currently undergoing massive construction as the federal and provincial governments work with the city to address the housing shortage.

New condos and townhouses are going up everywhere, and many seasoned investors are taking advantage of the opportunity to buy assignments. In short, you put a deposit on a home or condo that is still in the pre-construction stages. Though the unit isn’t even built yet, the value could begin to rise very quickly as demand for housing grows.

By the time the building is complete, your assignment could potentially be worth much more than what you paid for it. This type of investment can be profitable, but it’s also complicated. We strongly recommend working with a real estate team with experience in assignments before making any decisions.

Are condos part of your investment strategy? Then you may enjoy the related reading below:

Analyze Your Goals and Resources

There is no magical time that is right for investors as far as the market is concerned. Your course of action depends primarily on your knowledge, access to capital, and ability to manage the risks involved.

If investing in Toronto real estate is something you want to explore in more detail, a local real estate team can walk you through the process and let you know what to expect. If you move forward, we can also put you in touch with other professionals such as mortgage brokers, lawyers, and property managers – anything you need to make your next acquisition seamless and financially sound.

Are you still wondering if the time is right for you to make an investment? Our experienced Midtown Toronto real estate team members will help you weigh your options. Reach out  to us at david@batorigroup.com, bobby@batorigroup.com or call (416) 485-7575 for more information.