Toronto has many real estate investment opportunities that bring more investing clients into the marketplace each year. These are the top 10 frequently asked questions (FAQs) from our investor clients. These investing FAQs will undoubtedly be of help to you as well.
Top 10 Toronto Real Estate Investing FAQs
1. Which areas of Toronto provide the most significant opportunities for real estate investing?
Toronto’s real estate market has matured over the last ten years. With that in mind, there are no longer any diamonds in the rough neighbourhoods to zoom in on. However, the Junction and Main & Danforth, amongst a few others, still have some opportunities for purchasing a house. As for condos, the downtown core remains a fantastic area to invest in. Corktown and King West are solid options.
2. Is it better to invest in a condo or a house?
The debate of condo vs house is an interesting one. Both are great options. If our investor can afford it, we suggest a house with three or more units as it’s a great way to leverage the downpayment and have greater actual dollar returns. Most beginner investors cannot afford a house in Toronto; they need to start with a condo or two. There is no doubt that purchasing a condo in the right investment neighbourhood and in a building that performs well year in and year out is an excellent decision!
Investing In Toronto Real Estate
3. Is it better to work with multiple agents?
The short answer: no. I know, I know, we’re realtors, so we would say that, right? Not so fast; we always provide our clients with the best and most truthful answers. Working with multiple agents will be a colossal waste of time. Why? Each agent will be looking at the same product, and frankly, not many realtors in Toronto have any clue what makes for a truly great investment. Remember that your time is money. Most real estate agents want to get the deal done – never hearing from them again. We pride ourselves on being lifelong investment advisors for our clients – this starts with the first conversation and every future discussion- we are always available to our clients.
4. Should I pay down my mortgage as quickly as possible?
We don’t suggest that our clients rush to pay down their mortgage. One of the many great benefits of real estate investing is that you can leverage your capital and use someone else’s money – the bank – to grow your wealth. Borrowing money has been very cheap in recent years – the mortgage rates are so low that investors have a significant opportunity to become wealthy using the bank’s money. Because money is cheap today, it can be wise to maintain a mortgage and invest your surplus cash in either another real estate property or the equity markets. It makes sound financial sense. Note: paying down your mortgage on your primary residence is a different matter.
A Guide To Toronto Investment Properties
5. Should I have a business plan?
Yes, having a business plan is essential for a successful real estate investing future. The sooner our clients understand that real estate investing is a business, the sooner they will be successful. Most” investors” fly by the seat of their pants and have lucked out – or worse, failed and have had to sell without any meaningful gains. We help our clients determine the best business plan possible, along with our advisors. Developing an investment portfolio is excellent, but you must do it right to minimize mistakes and best leverage your capital.
6. Can I borrow for my downpayment?
The best answer is that it depends. If you have a primary residence with a great deal of equity tied up in it, you could consider getting a Home Equity Line of Credit (HELOC). The upside to this type of borrowing is that you are not responsible to anyone else but yourself, and you can write off the interest when you invest the capital. Speak to your accountant about this. In fact, this is how most of our clients begin their real estate investment portfolio. Another borrowing option is to reach out to friends and family to discuss your business plan and see if they would like to partner financially.
7. Should I work with a mortgage broker or directly with a bank?
If you wish, talk to both the bank and a mortgage broker before you decide which one to work with. In our years of experience, banks don’t work very hard for the business, and in some cases, deals will fall apart because of their lack of understanding at the retail level. Please keep in mind that the lowest interest rate is not always the best option – many other factors should be discussed before locking in with the lowest rate. For instance, can you re-finance for another property during the term? Does the represent know how to keep a deal together so that it closes? We have a preferred mortgage broker who has helped many of our clients become very wealthy – a truly fantastic investment advisor.
8. Should I purchase with a corporation?
If you are a new investor, you will need a lot of capital in the corporation to secure financing. In many cases, 40% or more for a downpayment because the banks don’t have much recourse if you aren’t buying the real estate under your personal name. Due to the higher risk level, the banks will also charge a commercial lending rate which is typically 2-3+% more than the residential mortgage rates. Also, without a business track record with the corporation, the banks won’t lend – from the bank’s perspective, it’s too much risk. A private lender may be an option. However, the interest rates will be much higher than a bank.
9. What if I cannot buy an investment property on my own?
We have had some clients discover that they cannot purchase a real estate investment on their own. This doesn’t need to be an issue. Reaching out to trusted friends or co-workers and offering a joint venture can be a great idea. You can use less of your capital and share the risk with other like-minded individuals. Once you have the experience and capital growth, you can branch out on your own. Investing with others can be a powerful way to begin your investment portfolio.
10. Is cash flow important?
Cash flow is very important. You don’t want to be underwater each month (paying out of pocket). You want your tenant to be paying all of the expenses with their rent. Here is the kicker, if you put down 20% on a property, it can be difficult to cash flow in Toronto. The reason is that properties are expensive in Toronto, and the rents don’t quite meet the needs. We can suggest solutions and options so that you don’t miss a beat in your search for an investment property.
➤ For more information on investing in Toronto real estate check out:
- Our Toronto Condo Investment Guide
- Best Investment Neighbourhoods In Toronto
- Condo Investment Mistakes
