BRIAN'S BLOG
Why An Investment Property is Worth Considering, Part 1
July 19, 2016
The Value of Investment of Income Properties in Toronto
The average price of a house in Toronto was up 20% in June 2016 as compared with June 2015. Unless your income is also going up 20% on an annual basis (and if it is, congratulations!), this means that fewer and fewer people are able to afford to buy.
However, one way you can still find the house of your dreams is by considering an income property.
Generating Income From Your Primary Residence
Very few people picture their ideal home as having a tenant in the basement, but if that tenant is paying upwards of $1000 a month, that covers approximately $200,000 worth of mortgage at today’s interest rates. This means that if your original budget was $700,000, you could look at a property with a rental unit that was valued at $900,000. This would certainly open up the options to you, giving you more choice on the neighbourhood and the house size. The banks will loosen the purse strings a little more if the unit is already tenanted.
As well, the rental apartment doesn’t have to be a permanent situation. As time goes by and your income (and family) grows, you may find that you’re able to comfortably pay the entire mortgage without the rental income, which means you can use the additional space for your own needs.
Purchasing a Condo to Rent Out
If you’re looking at purchasing a condo as an investment property, there are a few other things to consider, such as location. People often ask me where the best place in the city is for an investment property and where is the easiest place to rent?
With the rental market as tight as it is, it’s easy to rent any apartment in the city – rental income is pretty much the same everywhere, so anywhere in the core is relatively safe.
If possible, I suggest a place where the hydro isn’t included. The tenant has to pay and they are in control. If you have a property with a parking spot, you can rent it out separately if your tenant doesn’t want the parking.
Don’t buy the most expensive condo in the building – a unit with stainless steel appliances and granite counters will rent for the same amount as a unit with white appliances and laminate counters.
Next post: Finding the right tenant
*From the Canadian Mortgage and Housing Corporation: For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion.