Best Place To invest in Real Estate in Toronto

 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:

1. 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.
2. 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.
3. 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.

 

The Difference Between a Condo and Apartment: Which is Better for You?

While they can feel similar on the outside, look the same on the inside and cost about the same in

rent, there are differences.


To help you out, we’re breaking down what sets each apart to make it easier for you to decide which best fits your preferred lifestyle.

Ownership


The main difference between a condo and an apartment is ownership. This also impacts the management of the property. While condos are usually managed by a Homeowners’ Association (HOA), each individual unit has a separate owner. You have the option to purchase a condo, as you would a house. If you end up renting a condo, your property owner will differ from the unit next door.


The ownership of apartment buildings is completely different. Individual apartment units cannot be purchased separately. Instead, apartment buildings typically have one owner, most likely a corporation, with units leased to individual tenants.


Because of this difference in ownership, apartments are also often managed by a third-party company, and not the building owner. Leasing an apartment often means you work with a management company rather than the property owner.

Rules


Ownership also impacts the rules governing a condo and an apartment. While the basic can and can’t dos are often the same, enforcement and management of the rules differ.


For instance, in an apartment, the property management company enforces rules, and those same rules apply to all the units. According to the Department of Housing and Urban Development, the most basic responsibilities include:
Following the rules and guidelines of your lease
Paying rent on time
Maintaining noise levels that won’t cause a disturbance
Keeping your apartment reasonably clean, especially around the entrances to the unit
Disposing of garbage and waste properly


There may be additional rules to follow, particularly if you live in a pet-friendly building, but assume basic regulations like these will be strictly enforced.


Rules can be trickier with a condo. Aside from guidelines set by the HOA for common areas outside of the units, restrictions within condos may vary. Owners have the ability to set their own regulations and could have some unique requests. Make sure to ask about the “house rules” before signing a lease.


Many of the rules set by the HOA impact the owner directly and not necessarily the renter. They can include stipulations for paying fees, which help cover maintenance for common areas and the building exterior.


In some cases, HOAs have restrictions on the number of units designated as rentals. This is something to keep in mind when thinking about purchasing a condo with the intention of renting it.

Costs


Rent for an apartment is almost always a fixed amount for the extent of the lease. Most increases, if they’re going to happen, occur when it’s time to renew, although with enough notice, it’s legal for your rent to go up mid-lease. Some apartments offer month-to-month or short-term leases, but the agreements are usually for a year.


Apartment rent often depends on the market rate and unit availability. It’s also a good rule of thumb to factor in a few extra costs when calculating what rent you can afford. Some apartments will require you to have renter’s insurance, which is a minimal, extra cost.


Utilities are also often not included in your rent. The cost-per-month for these will vary by season, but according to Joe Roberts from move.org, “people who rent apartments should plan to spend $100-$150 (sometimes more) per month for utilities.”


If you’re renting a condo, your payments will also be a fixed amount for the rental period unless your agreement states otherwise. Property owners decide on the cost of renting a condo, which means it can differ between units.


Some owners include HOA fees and utilities as part of the rent for a flat fee, so you’ll pay once per month for all the basics. Utilities will average out in a condo at about the same as the apartment numbers above. HOA fees can vary, but, “some studies suggest that you can expect to pay…between $200 and $300,” per month says Javier Simon, CEPF® from Smartasset.

Amenities


Units in apartment complexes have pretty standard features that are the same across the community. Sometimes there are different floor plans available and options for standard or upgraded appliances if the property owner is investing in updates for within units. In the building itself, apartment amenities can include any of the following:
Free parking
On-site laundry
Pool
Gym
Community room available to rent for events
Business office
Park
Playground
Car wash


Any conveniences that make a property more appealing fall into this category, and can be what makes an apartment building stand out, especially in newer apartment complexes. The more luxurious the apartment, the wider the range of available niceties.


Condo community amenities are pretty much the same as what you’ll find in an apartment complex. Inside the units is where things will differ the most. The features here are sometimes more unique and upscale with things like granite countertops, hardwood floors and vaulted ceilings.


This is because quality amenities can create higher property value for the owners. According to updater, washers and dryers, high-end kitchen appliances and hardwood floors are the most common upgrades owners prioritize.

Maintenance


Free maintenance is a perk of renting an apartment. Some complexes offer services that let you submit work orders online and have 24-hour, on-call emergency maintenance so you can still get service after hours. Issues are usually resolved in a timely manner and can even get fixed when you’re not home.


Not only do you save money in not having to pay for repairs, but you get to keep all the time you’d normally have to spend waiting for a repair person to come and address the issue.


In a condo, you or the property owner are responsible for the maintenance of the unit. This could mean more out-of-pocket costs for you in the long run. It’s important to discuss who handles what, and get these terms in writing before you sign a lease.


If you have issues with your condo rental, you have to contact the owner, who may not be available at your convenience. This could mean longer wait times for completed repairs as well.


In both cases, common areas, including the outside of the building, are not your responsibility. The HOA fee maintains those spots in condo buildings and the property owner handles anything in an apartment.

Which is the better choice for you?


Renting an apartment typically offers a more professional experience. Renting a condo can be a more laid back arrangement, but with fewer services than an apartment. Both have positives and negatives, which is why it’s important to know your preferences.


Understanding what you find at both can help separate the difference between a condo and an apartment in order to select the perfect home. The decision is really about what you’re seeking as an individual in terms of short-term vs. long-term goals and your desired standard of living.