The Ultimate Guide to Investing in Toronto Real Estate

Toronto, Ontario, stands out as a premier real estate investment market in North America. The city’s consistent demand for housing and strong average rents offer significant advantages for investors. However, successful investment property acquisition still demands strategic planning and execution.

As leaders in West Toronto’s complex real estate arena, Christensen Real Estate Group is all about helping clients grow their wealth through real estate investments. In this ultimate guide, we’re offering in-depth insights on buying, optimizing, and managing a Toronto real estate investment based on your objectives.

Ready to invest? Our team has decades of industry experience to support your goals. Call 416.772.4723 or reach us by email at evan@christensengroup.ca.

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A New Perspective on Real Estate Investing
Where Toronto’s Rental Market Stands Today
Finding the Right Opportunity For You
Scaling Your Real Estate Investment
Investing in Your Own Property
Where to Buy a Toronto Investment Property
Sourcing & Screening Tenants
Understanding Tenant Rights

A New Perspective on Real Estate Investing

With that in mind, it’s not just professional landlords who are making equity-smart real estate moves in today’s market. As demographic and economic factors continue to shift across Canada, a wide range of Torontonians are seeking investment opportunities to bolster their personal finances and build generational wealth. Examples include:

First-time buyers searching for homes with rental potential
Existing homeowners looking to offset mortgage costs
Parents looking to create housing and financial security for their children
Seasoned landlords who are ready to scale up their portfolio

Equity Meets Security

Real estate is a unique investment. Beyond the short-term returns earned through rental tenancies, long-term appreciation also plays a critical role in the overall success of your venture. While market fluctuations can occur, long-term trends in Toronto’s real estate market have historically favoured appreciation.

Where Toronto’s Rental Market Stands Today

Over the past decade, Toronto’s rental market has evolved substantially. With the demand for rental housing units frequently outpacing historical highs, both the Municipal and Provincial governments pledged to stabilize costs by boosting supply. However, in light of inflation, interest rates and other factors, these efforts faced significant setbacks. This, paired with Toronto’s continued growth, has contributed to consistently rising rental averages over the last half-decade (with minor fluctuations on occasion).

Beyond steady demand, Ontario has recently enacted new legislation (Bill 60) aimed at supporting landlords and reducing certain pitfalls of real estate investing.

Searching for more investor-focused resources? Explore these related readings.

Finding the Right Opportunity For You

While investing in Toronto real estate offers significant benefits, the potential for success varies considerably from property to property. Therefore, choosing the correct opportunity requires a highly selective approach when analyzing the market. Once again, this is best accomplished by partnering with an experienced, investment-specialized real estate team.

Scaling Your Real Estate Investment

For investors with more capital to leverage, upsizing from a single-unit income property to a larger multi-family property can be financially advantageous.

Rather than relying on a single tenant, you now have multiple rental units generating revenue simultaneously. This can exponentially elevate short-term income. Further, this spread of income streams can provide an additional buffer against vacancy. If one unit happens to be vacant, the income from the other units can cover expenses and help mitigate losses.

Despite their advantages, managing multiple units and tenants can be demanding – this is where the full-time support of a dedicated manager becomes invaluable. A property manager can handle a wide range of responsibilities, including rent collection, coordinating repairs, tenant screening and minimizing vacancies.

Of course, professional management services come at a cost, which can impact returns. However, the benefits of reduced stress and streamlined operations may outweigh the costs.

Investing in Your Own Property

Investing in Toronto real estate does not always require the purchase of a separate income property. Existing homeowners in Toronto can utilize part of their current property to earn rental income and strengthen appreciation in the long term.

Before we explore examples, a quick disclaimer – Homeowners who are considering the addition of an income-generating asset within the property should consult an expert who understands the nuances of Toronto’s dynamic rental market – like us, Christensen Real Estate Group.

Building a Dedicated Secondary Suite

For existing homeowners, adding a secondary suite is an exceptional way to generate passive income. This revenue can serve multiple purposes, such as covering mortgage payments or funding new investments. Furthermore, undertaking this kind of project can enhance your property’s long-term value, as a readily available, turnkey rental unit is a feature future buyers will pay a premium for.

While advantageous, this process is not without its complexities. It requires a careful consideration of local laws and regulations, a conscious approach to construction and renovation, and strategic implementation.

Laneway Homes

A unique type of investment property, laneway homes have had a palpable impact on Toronto’s ever-evolving housing profile over the past few years. For investment-minded homeowners, these freestanding secondary suites come with a number of compelling advantages, including the ability to build them on your existing property.

In terms of potential earnings, market data shows that a two-bedroom laneway suite and a two-bedroom condo with similar square footage can earn the roughly same monthly rental income.

However, not all properties in Toronto are actually eligible for laneway home construction. First, your backyard must meet basic depth requirements, which are dependent on the height of the completed laneway home. Next, your lot must also be a minimum of 7.5 metres wide, and the laneway or alley it sits on must be a minimum of 3 metres wide.

If your laneway home is under 4 metres tall, it must remain a minimum of 5 metres from your primary residence. For properties taller than 4 metres (to a maximum of 6.3 metres), there must be a minimum distance of 7.5 metres from the main home. Keep in mind that you must retain a 1-metre gap between the rear property line and the perimeter of the laneway home.

Where to Buy a Toronto Investment Property: Up and Coming Neighbourhoods

Toronto, as Canada’s largest city, consistently experiences exceptional demand for rental housing. However, it’s a common misconception that the best investment opportunities are strictly limited to the downtown core or ultra-trendy enclaves. In reality, rental properties are sought-after all over the city, continuously fetching impressive returns in even the most overlooked communities.

Discover a selection of up-and-coming neighbourhoods that are particularly advantageous for those looking to invest. These areas offer a strong rental market alongside reasonable average real estate costs, making them an excellent choice.

The Junction

The Junction has undergone a remarkable transformation in recent years. Formerly an industrial enclave, it has evolved into a flourishing first-choice residential community. T

In addition to the elevated need for rental housing in the area, real estate in The Junction has seen unprecedented appreciation in recent years. This growth promises a dependable return on investment in the long term, paired with the recurring income earned from rental tenants in the short term.

Dundas West

Once considered to be a hidden gem, Dundas West has swiftly joined the ranks as one of West Toronto’s most sought-after residential communities.

For investors, this translates into a continuous stream of potential tenants who value the neighbourhood’s unique ambiance, proximity to downtown Toronto, easy access to public transportation, and more.

Wallace-Emerson

Located just south and east of The Junction, Wallace-Emerson is a rapidly transforming neighbourhood with a unique balance of old and new.

Wallace-Emerson is also slated for immense growth over the next decade, introducing new amenities and housing options to the area – including the proposed Bloor-Lansdowne GO Station, making the neighbourhood even more attractive to incoming renters and buyers.

At Christensen Real Estate Group, we can direct you toward specific micro-markets and neighbourhoods that present the best combination of strong buying opportunities and high rental demand.

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Sourcing & Screening Tenants

When it comes to investing in Toronto real estate, one of the most significant variables in your success, both logistically and financially, is your tenants. This is true whether you’re looking to rent out a spare room, build a laneway home, or simply buy a standalone income property.

Therefore, effectively sourcing and screening tenants will be essential to a smooth and profitable investment.

How to Screen Tenants in Toronto

1 – Applications & Interviews

Signing a tenant without getting to know them poses a big risk. So, you’ll want to garner key insights about any serious tenant candidates. The best way to do this is by establishing a well-thought-out (and legal) application and interview process.

2 – Know Which Documents to Ask For

As part of the application process, you can (and should) ask a potential tenant for several critical documents, including:

A copy of government-issued identification
Employment letter or recent pay stubs
Employer contact information
A recent credit report
Current landlord reference
Past landlord reference
Personal reference (1 or 2)

3 – Always Check References

Once a potential tenant has provided all the requested information and documentation, you must take steps to verify that the information is accurate and contact all included references.

Call the employer to confirm the tenant’s employment status and salary.
Thoroughly read through the provided credit report and confirm their credit status.
Call their current and past landlords, confirming the details provided in their application.
Call their personal references and ask about cleanliness, reliability, and personality.
Consider looking them up on social media to search for potential red flags.

Buying an Investment Property With Existing Tenants

Buying a dedicated investment property doesn’t necessarily require finding a place that is tenant-free. In fact, finding a place with existing tenants offers prospective landlords a number of conveniences, such as an immediate income stream, bypassing the involved tenant screening process, and the peace of mind that comes with inheriting a tenant with a stable, reliable rental history.

That said, there are drawbacks to this approach as well. In Ontario, many properties are subject to restrictions on how often – and by how much – rent can be adjusted.

Understanding Tenant Rights

As an investment property owner, your tenants will have some guaranteed rights under Ontario’s Residential Tenancies Act (RTA). Whether you’re ultimately planning to move into the property you’re purchasing or take on a landlord’s role, you should review the RTA. This will help you understand your responsibilities as an investor to ensure that you do not run into any issues or penalties.

Partner With Toronto Real Estate Experts

If you’re looking to make a strategic, high-return investment in Toronto, you’ll need an expert in your corner. That’s where we come in.

Boasting over four decades of experience in West Toronto, Christensen Real Estate Group is your best resource for sourcing and securing a profitable income property. We know our local market better than anyone and have the insights and intuition to help you discover the perfect neighbourhood to invest in.

As investors and landlords ourselves, we can provide you with critical advice on tenant sourcing and communication, relevant regulations, and more to help you get off on the right foot. Not only will we help you identify lucrative, high-quality opportunities, but we’ll ensure you’re set up for success today and tomorrow.

Looking to invest in real estate? We can help! Call 416.772.4723 or reach us by email at evan@christensengroup.ca.