A real estate investment in Toronto can often seem like a fickle partner. In some periods, the potential for profit in the Toronto real estate market is high. On other periods, each real estate investment step might seem like a risky move towards a loss. All in all that is part of the thrill of real estate investing.
In terms of investing in the Toronto real estate market, you are either for it or against it. Sure, there are skeptics that prefer hanging onto the news headlines that Toronto’s real estate bubble will soon burst. On the other hand, thousands of real estate investors and Toronto homeowners have made significant equity gains from choosing to purchase homes or commercial real estate when they did.
Well, Toronto is a fast-evolving world-class city, joining the likes of London, New York City, and San Francisco. It might seem too good to be true, but Toronto’s real estate landscape is destined to keep its growth momentum. So, if you are wondering whether a real estate investment in Toronto is worth it, the correct answer is a resounding “YES!”
Why should I consider a real estate investment in Toronto?
1. Strong real estate market appreciation
Land tends to increase in value quickly, particularly when it’s scarce. This is true in Toronto because this city is running out of vacant land to construct more properties. On the demand side, Toronto’s real estate market strength is based on a stable and diverse economy. It is the second fastest-growing urban region in North America and remains to be Canada’s top tech hub. The combination of these factors drives a constant stream of Canadians moving into the city because of employment opportunities.
The combination of the limited supply of houses in Toronto and the growing demand for housing units makes Toronto’s residential real estate market grow quicker than other regions. In the past decade, the real estate market in this city has seen an annual appreciation of about 8.3 percent.
2. Minimal property price fluctuations
Some cities in North America often see periods of high commercial property and residential properties price appreciation followed by periods of low or no appreciation. More volatile property prices are often driven by speculation motives when property prices might see a sudden increase from investors who buy into development plan announcements. In case things according to the initial plan and the anticipated demand are not met, the prices in such cities will drop.
The good news is that the residential real estate market in Toronto is backed by actual demand for housing units. Even with numerous condo projects in progress, the city is not approving housing projects fast enough and remains underdeveloped by approximately 26,000 housing units. Thus, there’s more stability in this real estate market, making it low risk for people considering a real estate investment in Toronto.
3. Growing rent
The rental income is one of the top sources of returns for any residential real estate investment in Toronto. Investors want their rental properties to have stable cash flow, which can bring an excess of cash flow on top of mortgage payments and the rental property’s management expenses.
The steady demand for housing in Toronto Tickles down to the rental real estate market, generating reliable and stable rental income for a real estate investor. As home and other property prices in Toronto remain high, there’s an increasing number of people who can rent housing units. This translates to an increased demand for rental properties and minimal rental vacancies.
When you combine the fast-growing population with the growing number of people who are renters, there is a continuously increasing demand for rental units in Toronto. Besides, Toronto has the highest rent growth rate in Canada, which is good news for anyone considering a real estate investment in Toronto.
4. Value-added appreciation opportunities
Unlike most cities with newer homes and other property types, Toronto city has many old homes that require upgrading. If you can buy and renovate a house and bring it up to its best use, it is possible to unlock tremendous value. For instance, a home bought for $1 million and renovated for $100,000 can be appraised for over $1,200,000. That’s approximately $100,000 value-add appreciation.
5. Better cash flow potential from property upgrades
In addition to the increasing value of the property, an upgraded real estate investment in Toronto can mean that you will attract better tenants who are ready to pay higher rent for an excellent property. Due to the city’s housing crisis, Toronto allows the process of converting single-family homes into duplex and duplex properties into a triplex. This offers you the chance to increase rentable space, which means better cash flow from your real estate investment in Toronto.
We can help
Toronto’s residential real estate market is ideal for different forms of real estate investments, given its good balance of property appreciation and cash flow. In economic downturns, history has taught us that the real estate market drops less than stocks and bonds and rebounds quicker than other investments.
Besides, residential real estate is a basic necessity, and even during a financial crisis, governments are more likely to make significant financial subsidies to help with those necessities. That makes a residential real estate investment in Toronto more defensive than most types of investments.
Our team of real estate coaches can help you learn more about the Toronto real estate market, uncover real estate investment opportunities, and probably help make important financing options. In addition to real estate coaching, we also offer tenant placement services and investment property management services at affordable property management fees.
