We’ve all heard it before — when it comes to making a good investment in real estate, the most important factor is location, location, location.
However, in an exponentially expanding city like Toronto, where it seems there are an endless number of aspirational neighbourhoods, trendy areas, and up-and-coming communities, determining where the next best investment neighbourhood will be can be a challenge.
With that in mind, however, there are a few key features that you can look to identify in a particular neighbourhood that act as good indicators the area will blossom into something special.
So, if you’ve been wondering what makes a good investment neighbourhood in a city like Toronto — perhaps ahead of an upcoming real estate purchase — here are a few things to consider.
A Changing Age Demographic
One of the single best factors to uncover in a neighbourhood that indicates it’s going to have a sharp up-turn in value is its age demographic. So often we see in the real estate life cycle that previously sleepy neighbourhoods primarily populated by older empty-nesters quickly turn into the trendiest places to live for younger people.
Once these tired old neighbourhoods begin to switch hands from older generations to newer ones, it doesn’t take long for property prices to rise. The reason is, older homeowners tend not to make any major improvements or investments to their homes once they reach a certain age — it just isn’t worth the hassle if they only plan on living there for the near future.
Once they eventually downsize and sell, their dated ‘fixer-upper’ homes are purchased by younger homeowners for a discounted price compared to homes on similar lot sizes in more developed neighbourhoods.
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Then, these younger buyers re-invest in their newly-purchased homes to bring them up to modern standards and voila — you’ve just seen a rapid increase in property values across the community.
For a Toronto-based example, let’s look at The Junction. Only a handful of years ago it was a shadow of its former self, with properties largely owned by ageing senior citizens seeing out the last few years living in their family homes. Next thing you know, it’s one of the hottest places to live anywhere in the city.
Whether they’re singles, couples, or young families, this age demographic is who you want to follow if you’re looking to make a good investment in real estate.
As a team of local Toronto real estate professionals, we know the city like the backs of our hands. Use our local insight to your advantage by reading through our detailed neighbourhood guides, the read-up about our Toronto area expertise.
Public Transit Development
In large metropolitan cities like Toronto, public transit serves an enormous segment of the local population. Whether Toronto residents don’t own a car, don’t want to pay for a parking space, or simply don’t even drive, there are huge numbers of people who live downtown and depend on the TTC to get around.
Therefore it comes as no surprise that some of the most high-ticket neighbourhoods in the city are based close to public transit lines and subway stations. However, as our city continues to expand outward and increase in population density centrally, the demand for a more comprehensive public transit system has also increased.
In knowing this, another fantastic indicator of a good investment in real estate is to follow the current and future plans of Toronto’s public transit authorities. Companies like the TTC, GO Transit, and specifically, Metrolinx, who manage and integrate road and public transport in the GTHA release their development plans far in advance.
Almost counterintuitively, we’ve seen property prices in parts of the city where the most amount of public transit development takes place actually plummet initially. Just look at communities like Yonge and Eglinton, where the Eglinton Crosstown LRT line is presently being built or Riverside, where major Ontario Line construction is set to take place in the near future.
Current residents in these communities know these long-term projects will take years (if not close to a decade) to finish, so many would rather cash in and sell their homes from the get-go rather than wait for construction to finish. Once construction is completed, however, property prices will soar once again due to the convenience of the transit systems.
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Emerging Retail Investment
It’s all well and good to be excited when your favourite store, cafe, or quick-service restaurant opens up a location near you, but is it really something you should be basing something as important as a real estate investment on? As it turns out, the answer is probably yes.
In the real estate industry, this is playfully known as the Starbuck paradox, and it’s something that’s got some real weight to it. When retail companies — especially the largest corporations like Starbucks, McDonald’s, and the like — decide on where to launch a new location for one of their branches, they don’t just pick a neighbourhood at random and hope for the best.
Instead, a lot of in-depth technical market research goes into identifying emerging neighbourhoods and communities in hopes that these corporations can capture consumer market share early on before the neighbourhoods become more established. From their perspective, they would rather target neighbourhoods with good long-term growth potential than try to enter a neighbourhood that is already established and fight against competitors for consumer market share.
At Christensen Real Estate Group, we’ve leveraged our expertise in residential real estate investments to help countless clients make excellent long-term investment decisions. If you’re curious to learn more about how to make a good investment in real estate, read through our real estate investment-specific resources here.
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As an example, have you ever seen a Starbucks location on one street corner then walked only a block or two in one direction and seen another one? While these retail locations might seem oddly close to each other, their corporate-run data and statistics reflect consumer demand for their products, and more often than not it’s tied to neighbourhood-specific population growth research.
Our advice? Use this big-budget market research to your advantage — leverage Starbuck’s findings on neighbourhood growth potential and invest where they are doing the same.
For further information and advice on real estate investing — or anything else real-estate-related — feel free to Contact Us here at any time.