I, as a Toronto Real Estate Agent and investment analyst, kept analysing Toronto’s market on a weekly basis in the past several years to help our investors in finding the best deals in Toronto’s real estate market. As a result we have screened the best places to invest in real estate in Toronto in 2024 for our investors.
In this thorough review, you can find our choices of the best places to buy investment property in Toronto. I’ve categorized the areas by the price range and asset type.
Financing
Getting a mortgage for an investment property isn’t as easy as borrowing for your primary residence – you’ll need at least 20% of the purchase price for a down payment, and only a portion of the income you get from rent will be considered in qualifying you for a mortgage (usually 80%). For commercial property investments, you’ll likely need a down payment of 50%.
Taxation
In Canada, any money collected from rent is considered income, and thus subject to income tax. Increases in the value of your investment property (from the time it becomes an investment property to the time you sell it) will be subject to capital gains taxes. If you’re thinking of buying an investment property, make sure to talk to your accountant to fully understand the tax implications.
Timing
Most real estate investments should have longer-term objectives. Because of the unpredictability of the real estate market, expecting to profit in a short period of time is risky.
Goals
What are your investment goals? There are three ways to make (or lose) money by investing in Toronto real estate:
- Cash flow (cash return) – Cash flow is the difference between what you collect in rent and the expenses you pay out. In Toronto, cash flow positive properties (purchased with 20% downpayment) are hard to come by, though it’s fairly common for investors to break-even on a monthly basis (meaning that the rent they collect is equal to the expenses they pay). Cash flow is affected by factors outside of the real estate market, for example, it depends on your downpayment and mortgage terms.
- Appreciation – When you sell your investment property for more than you paid, that’s called appreciation. For example, you buy a triplex for $1,300,000 and later sell it for $1,600,000, that $300,000 difference is the appreciation in the value of your investment. Toronto properties have historically appreciated favourably for investors.
- Equity (mortgage paydown) – When a tenant pays down your mortgage, you’re building equity. For example, you buy a property for $600,000 with a $120,000 downpayment and you apply the rent to the mortgage and rent it for 25 years. Eventually, you will have a mortgage-free property. When you then sell that property for $800,000, you’ll have built up $680,000 in equity (and you’ll get your original investment of $120,000 back).
Return on Investment (ROI)
Real estate investors use different calculations and tools to calculate the returns on their property investments:
Cash flow is the net amount of cash moving in and out of an investment
Calculation: Income – operating expenses – financing costs
Capitalization Rate (cap rate) is the rate of return on a real estate investment property based on the income that the property is expected to generate.
Calculation: Operating Income / Purchase Price
Return on Investment (ROI) – a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments
Calculated by adding the cash return + mortgage pay down + capital appreciation.
There are many tools out there to help you predict the ROI of investment properties (and of course, the BREL team has a proprietary Income Analysis tool for our clients).
Where to invest in real estate in Toronto in 2024
Average Toronto home price in January 1996 was $203,121 and in the beginning of March 2024 it was $884,385. The average residential property prices has been over tripled, to be exact over 3.35 times higher that what it was in 1996.
To split it in annual appreciations, it’s about 13% appreciation YoY! By taking a quick look at the chart below you can see the trend. However in some areas, we had higher appreciation and in some areas lower growth. In this article you’ll read about the areas that we think are the best places to buy investment properties in Toronto in 2024.
Read More : Best Home Improvements For Resale
Best place to buy an investment property in Toronto for a budget of $450K-$1M
In Toronto’s real estate market the highest pressure is on the properties under $1M, so buyers and investors see the highest demand in this sector. The list below is our top areas to buy property in Toronto for $450K-$1M:
1. Mimico, Asset Type: Condo Apartments:
2. Downtown Toronto, East Side, Asset Type: Condo Apartment
3. Leaside, Asset Type: Townhomes, Attached Homes
Where to Invest in Real Estate in Toronto for a budget of $1M-$2M
In this budget range, in Toronto you have more options. Check out our list ranked for 2024.
1. Bloor Ossington, Asset type: Walk Ups and Old Detached Houses
2. Leaside, Asset Type: Detached Homes
3. Swansea, Asset Type: Detached or Semi Detached
Where to Invest in Real Estate in Toronto for a budget of over $2M
This budget range is more flexible. You can either buy a few properties in great neighbourhoods that I mentioned above this article for under $1M price tag, or you can go straight and buy properties in the below market areas:
1.Bloor St West Corridor and Roncesvalles: Asset Type: Multiplex Properties
2.St Andrews, Asset Type: Detached Bungalows
3.Rosedale, Asset Type: Detached Properties
Conclusion:
As a Toronto Real Estate Agent and investment analyst, I've meticulously monitored Toronto's real estate market over the past several years to guide our investors toward the best opportunities. In this comprehensive review, we've highlighted the top places to invest in real estate in Toronto in 2024, categorized by price range and asset type.
However, investing in real estate involves more than just selecting the right property. It's essential to consider factors such as financing, taxation, timing, and investment goals to ensure a successful outcome. Whether your focus is on cash flow, appreciation, or building equity, understanding the various metrics such as ROI, cash flow, and cap rate can help you make informed decisions.
With the average Toronto home price tripling since 1996, real estate investment remains a lucrative opportunity for those seeking to grow their wealth. From the bustling streets of Downtown Toronto to the serene neighborhoods of Leaside and Mimico, there are ample opportunities for investors at every budget level.
Ultimately, by leveraging market insights, financial analysis, and a strategic approach to investment, you can navigate the complexities of the real estate market with confidence and capitalize on the opportunities that Toronto has to offer in 2024 and beyond.
