The beauty of investing in pre-construction condos is that it requires very little upfront so you’re building more equity with a minimum investment. As your mortgage goes down and rent prices go up, your rental income will continue to increase.Īs your investment builds equity, you’re able to borrow that equity (up to 80% of the property’s market value) allowing you to leverage that money into additional properties. While you may not succeed in finding a cash flow positive or income property in Toronto, you are building equity - and fast. Historically in Toronto, real estate averages a 5% increase year-over-year, though the market has been out-pacing this average in recent years. We know by precedent that by holding a property it will increase in value. Related: How To Use Home Equity To Buy Or Invest In Another Home In Canada To ensure that you are comfortable, choose an investment that fits your financial situation and risk tolerance. The sooner you’re able to get your money to start working for you by getting into the market, the better. The bottom line is anyone looking at real estate as a means for creating wealth that hasn’t yet gotten into the market is missing out. Meanwhile, someone else is paying down the principal on your mortgage and that negative cash flow can also be written off against your capital gains.īy reframing the way you look at your investment, it costs you $3,600 to make $30,000. Seems crazy right?īut what if I told you at the end of that year you’ll have actually earned 5% in equity on your property? So while on paper you may have lost $3,600, in the grand scheme of things your property’s value went up and earned you $30,000. When you put all of your expenses into your investment property calculator - monthly mortgage, property taxes and insurance, condo fees, etc - and deduct that from your rental income, let’s say you actually lose $300 a month to carry that rental property. Let’s say you own a rental property that cost you $600,000. Sure, the rental cash flow is a nice bonus, but in a market like Toronto, you make the most by investing wisely and building equity. When approaching the economics of finding a good rental property, you always want to have a long-term vision. Consider investing in multi-residential real estate The same reasons that made your unit inexpensive on signing, will affect your resale price. However, when it comes to the resale of your investment, you get what you pay for. If the building is in a prime location, you’ll still be able to charge a competitive rental price for a unit that cost you far less in comparison to the premium units in the building. If you’re planning on holding your investment as a long-term rental or income property in Toronto, you can invest in a disadvantaged unit which will be cheaper on signing for reasons like poor view, proximity to the garbage chute, and so on. Look for ‘disadvantaged units’ in popular neighbourhoods When it comes to rental property cash flow analysis, opting for a smaller two-bedroom investment property allows you to net a higher return and reduce carrying costs. Why?īecause the average rental price for two-bedroom condos is based on what the area or location commands the size won’t have too much of an impact on the overall rental price but it could impact your overall purchase price. For example, a 680sqft condo with two bedrooms and two baths will rent for a higher price per square foot than a larger two-bedroom condo with the same amenities. When it comes to square footage, a smaller two-bedroom condo will rent for a higher price per square foot than a larger two-bedroom condo.
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