The Toronto real estate news has been hot this year, and just when consumers thought that a bubble burst would slow things down in the market, the opposite happened. The demand for housing has remained as high as ever, fueled by a strong economic base which continues to draw workers and their families to the city.
You might be asking yourself what the best way is to buy your first rental property in Toronto, but you should be well-versed in this type of investment before you jump in.
The real estate market has always been known to be unpredictable and Toronto is no exception. Add in a global pandemic, more companies switching to working from home, and you have yourself quite the amount of Toronto real estate news to catch up on and learn about. If you’re a beginner, or you have skin in the game, you will need to know insider information about the housing market so you can put together the right strategy to navigate it and begin your rental property journey.
Buying Your First Rental Property in Toronto
Here are some things you should consider before buying your first rental property in Toronto.
Are You Prepared to Be a Landlord?
When you buy an investment property and rent it out, you become a landlord automatically, unless you have already spoken with a property management company. While being a landlord can be a great way to earn some extra income, it also takes hard work and can end up taking up a lot of your spare time.
In addition to finding and buying the right property, you must also prepare your home or bedroom unit for your tenant to live in, and then also begin to find and choose a reliable tenant that you trust will make payments on time and not damage your new rental property purchase. Plus, you can expect your rental to need occasional maintenance or upgrades, which is your responsibility to handle.
However, if you aren’t the handy type and also don’t have a lot of extra cash to hire handymen, then you might not be cut out for the role. Accidents happen, and before buying rental property in Toronto, you must first be sure you are set up financially to cover any potential damages such as leaks, appliances, windows and more.
Increase Your Down Payment
Keep in mind that if you want to purchase an investment property in today’s housing prices, you will need to provide a 20% down payment on houses in Toronto that are listed over $500,000. However, if you want to make money with your investment, the more money you are able to put down up-front, the better.
If you have the means, think about increasing the size of your down payment. If you put 25% down, then you will make the money back (and more) in equity, over the first year. A bigger down payment will lower your monthly mortgage payments and reduce your overhead costs and help you to provide quality of service for your next rental income property.
Check Out Up-and-Coming Neighborhoods
A great way to make money from a rental property is to buy one in an up-and-coming area that is being developed. If you can get a property in an area that is slightly less desirable but with prices that are lower than other areas, then you can maximize profits as the neighborhood develops and begins gentrification. Many students, or first-time renters from outside of the GTA (General Toronto Area) will opt for a less desirable area in order to be able to afford living in the city and have easy access to downtown and TTC.
It helps to stay up to date with Toronto real estate news, so find trusted blogs and websites from industry professionals that can keep you in the loop when looking into tips for buying your first rental property in Toronto, like Zoocasa.
Hold on to Your Investment for the Long Term
The best investment strategy for a rental property is to focus on the long-term gains, and to not rely on it for a quick win. In Toronto, your equity gains are what matters most when investing in rental properties. The longer that you hold onto your investment property, the better. The equity gains will be very rewarding over time, and your rental property income will be a great bonus on top of that. If you can hold onto your investment property for the next five to six years, then you could see an amazing return on investment and consider selling at a higher price at that time, and begin to flip your next home.
Invest in a Multi-Residential Property
If you have experience being a landlord or it interests you, then consider purchasing a multi-residential building, which typically consists of 3 or more dwelling units. While it’s true that this type of property will come with a higher price tag and require more money upfront, if you can, then these types of properties make great long-term investments.
To be able to take advantage of the financial gains and cash flow that multi-residential properties could provide you, you might want to have some savings put aside for renovations and maintenance. Modernizing your property with paint jobs, trendy light fixtures and new appliances, can help you increase the price of rent.
