Finding an investment property in Toronto
If you are looking to cash-in on the hot Toronto real estate market, you are not alone. Many investors have profited from buying, renting, flipping and selling properties in Toronto.
Here are some tips in picking a good investment condo:
1. Make sure you have a long-term strategy in mind (of 10 – 20 years). This way you can avoid realtor fees associated with constantly buying and selling. You will also avoid land transfer taxes that also eat into your ROI.
2. Ideally your investment condo should carry itself (i.e. revenue should break-even or be cash positive). Structure the down payment on your mortgage to make sure this is the case. At a minimum you can do a 80/20 mortgage to down payment split.
3. The condo should present a good opportunity for both “cash flow” and “value appreciation” over time. Just because a condo is cheap and has good cash flow characteristics doesn’t mean it’s the optimal play. Try to get both cash flow value and appreciation value when considering your investment.
4. Choose a building built by reputable developers. Historically these have appreciated more then the stock market!
5. Do your homework and research projects in great locations. A good place to start your real estate search is Home.ca.
Some savvy investors have discovered the benefits of renting on a short-term basis as a way of generating additional monthly rent. For real estate investors looking to take advantage of the short-term rental market there are some additional benefits to this model:
1. Short-term rental rates are normally double those rates experienced through renting a condo unfurnished through your realtor.
2. Due to shorter term rentals there is also greater flexibility to sell your investment or do something else with it if you change your mind later.
3. This strategy can be the best for Cash Flow + Value Appreciation.
Of course as with any investment strategy there are also a few things to consider & keep in mind:
a. Some buildings have minimal time requirements for leases usually requiring 6 months or longer. For this reason it’s advisable to stay away from these buildings for the short term rental model and choose buildings that are short term friendly.
b. There are additional costs in the regular cleaning in the unit and extra costs in the setup such as furniture, internet, cable tv.
c. This model provides less predictable revenue from your investment property and there is a higher risk of cancellations or vacancies
d. Managing a short-term rental property requires more time than traditional renting. Be sure you’re ready to handle it or hire a professional property management company like ours to manage it for you. Sky View Suites offers an attractive exclusive management option for investors to turn their condo into a furnished rental property – rented to one of our many corporate clients.
Lastly if you’re willing to wait longer, buying pre-construction condos in Toronto can make sense. This strategy can be advantageous if new units in prime locations become available, however it’s important to remember that in today’s real estate market many times it’s actually cheaper to buy re-sale condominiums rather then new ones.