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Downsizing in a Toronto Buyer’s Market? Here’s How Your Home Can Earn You More Money

11.23.2022 | Real Estate Market

Downsizing is an exciting step in the cycle of home ownership. The process of selling your family home and transitioning to a more compact living space can open up endless opportunities and freedoms – especially in Toronto. 

That said, today’s real estate market is no longer what it used to be. High-interest rates have driven many prospective buyers out of the market, introducing new difficulties for downsizers looking to sell their home. Simultaneously, elevated property costs have left a substantial percentage of the population dependent on rental housing – causing rental fees across the city to reach new heights. 

Today’s market does offer some opportunities for seller success, however, there’s never been a more advantageous time to own a rental property in Toronto. If you’re considering a downsize, holding onto your existing home as an income property can help you capitalize on market dynamics to earn some seriously impressive passive income. 

While owning a tenanted rental property makes a great investment, there are duties and responsibilities you will need to be prepared for as a landlord. For an introductory guide to property management in Ontario, click here

Buyer’s Market at a Glance

Today, Toronto’s once hyper-competitive and fast-paced seller’s market is close to unrecognizable. As climbing interest rates continue to keep buyers out of the market, sellers are no longer capitalizing on buyer desperation. Throughout 2022, the housing market would slowly neutralize, before balancing out completely. As of October, the average sale price of a detached home in Toronto has declined by over 11% compared to the year previous. 

While these trends could theoretically indicate a “buyer’s market”, that’s not an entirely accurate classification. Despite declining market values, high-interest rates are preventing a large subsect of eligible buyers from entering the market. So while plateaued housing costs are benefiting some buyers, it’s a fairly small pool. 

For downsizers who are looking to sell their home, ensuring an optimal sale in today’s market – while not impossible, will prove challenging. On the inverse, for the small portion of downsizers with the available capital to buy in today’s market, finding a great property could be easier. 


Preparing to downsize? Explore these market-informed resources to ensure you find success in the market. 


Your Property as an Asset 

While downsizing is often motivated by lifestyle factors, a move of this scale warrants significant financial considerations. Given the difference in value between detached homes and smaller living spaces such as townhomes or condos, downsizing often frees up a notable volume of capital. Many of the downsizers we work with are either retired or approaching retirement and the sale of their current home plays a significant role in their financial planning for the next stage of their life.

However, this strategy can be more difficult to execute in buyer’s market conditions. Your home is already a substantial investment asset. When you elect to sell it, you’ll want to get the best return possible. In a buyer’s market, this is far more challenging.  

In order to maximize the capital earned from your home sale, it may be more beneficial to use it as an investment property until market dynamics change in the future. Holding onto your home allows you to continue building equity while optimizing your return in the future. 

While almost all Toronto properties make a viable investment, certain factors such as your neighbourhood could make your home uniquely exceptional from a passive income perspective. 


New to the world of real estate investment? Explore these posts from our blog to discover how you achieve high-ROI success in the Toronto market. 


Earning Passive Income as a Downsizer

When you use your home as an investment property you generate wealth through two primary channels – cash flow, i.e. the income you receive from tenants, and the equity from the property itself. Ideally, downsizing while holding onto your existing property will allow you to have a positive cash flow.

Although landlords in Toronto are earning income at higher rates than ever as a result of elevated demand, it’s important to do your research and make sure that the passive income you earn from your home will be enough to cover your monthly expenses, while leaving some money aside for savings. 

Looking for expert advice on downsizing or real estate investing in Toronto? Contact us at 416.441.2888 ext. 766 or email [email protected] today to learn about your options.

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