In the world of real estate, Toronto continues to climb up the ranks, shuffling top spot positions with cities like New York and Dubai. Thus, investing in real estate in this evolving world class city is worth looking into.
According to data from 2016, 13.3% of Canadians live in a condominium and this number is more than 20% for the city of Toronto. This is no surprise, as Toronto retains its spot as one of the best performing real estate markets in North America; leading to a doubling of average house prices in the GTA from around $400k in 2009 to $800k in 2019. This good return for leveraged real estate investments as well as the structure of Toronto public transit are the main reasons why the number of high-rise apartments in Toronto is growing at astronomical rates, with there being more high-rises in Toronto compared to both London and Tokyo combined!
In Toronto, the condo market tops the list as one of the best markets worthy of an investor’s time and money; so how do you tap into this rather juicy market?
1. Investing in a Condo Apartment
This is a particularly good option if your aim is to rent out the property, as the condo apartment gives you the least headache as a rental property owner when compared to other property types; especially if you get guarantee for the rental income. The rental amount would cover all necessary payments such as: condo fees, insurance, condominium property tax and a big portion (if not all) the monthly mortgage payment amount.
It’s always best to purchase houses in prime locations close to workplaces such as Toronto Downtown, around the Finch station; and neighborhoods like Yong-Eglinton. This way, you are more likely to get many good tenant applications. When making a decision on which home to buy however, it’s best to work with one of the top real estate agents in Toronto so he or she can let you know more about different high-rises and their reputations. For example, if a specific high-rise is famous for being used as an Airbnb host, you may not want to live there. Also, should your condo’s price be higher than the market’s average asking price, the more at risk you are of being negatively hit by a recession or by scrapping of the mortgage stress test (stress test has favored the condo market over the detached market).
With enough cash to cover the minimum mortgage down-payment which can be as low as 5% of the property value, and a regular source of monthly income, condo apartments in certain areas are affordable to purchase; however even a 2-bedroom apartment in downtown Toronto can be very costly.
Living in a condo apartment has one major advantage: it’s proximity to workplaces. While this can be a prime selling point, condo houses are also typically very small- so much that they can hardly support a family of 4. Also with time, condominium monthly fees will go up as a building gets older; so you have to spend more on these costs.
2. Investing in a Pre-construction Condo
The high overhead and mortgage costs for condo apartments are driving real estate investors who are still interested in this property type (because of the high demand for condos) to look for other options. One such golden opportunity is the ability to invest in pre-construction condo units; as even resale condo prices have also soared to close to $1,000 per sq. ft. in downtown Toronto.
More real estate investors are actively considering pre-construction condo unit purchases, however, these tend to be more expensive and have low guarantee as to what the end result will be. It certainly helps to choose a prime location, find a reputable builder, evaluate the condo’s potential carrying costs and involve a good lawyer before investing heavily in a pre-construction condo unit. Since these units don’t require you to be approved for a mortgage and passing CMHC stress test you’d only be paying part of the price for the unit in a couple of installments, you win some points here.
Conclusion
As real estate in Toronto continues to take its space as a rising market, the condo market can be considered one of the most effective channels to homeownership and earning good rental income, especially with such a tight demand-supply ratio. Investing in the condo market would be highly beneficial at this time.
