Introduction
Toronto’s housing rules have been the same for many years, but not anymore! Now, there’s a big push to make neighbourhoods busier, especially along Toronto’s “major streets”.
A proposal suggests building 30-unit in six-story small apartment buildings or townhouses on major streets in Toronto. The final report got approved by the Planning and Housing Committee meeting in May, and now it’s heading to City Council.
Let’s take a closer look at what’s happening and why it’s a big deal for real estate investors!
What Is A Major Street in Toronto?
You can check out a map that outlines these major streets in Map 3 of Toronto’s Official Plan. And it’s not just the big-name streets like Yonge or Bloor; smaller ones like Dovercourt or Mortimer could also qualify.
These streets are seen as more accessible by public transit, which makes the potential investment opportunities even more exciting.
what Are the Details Of Toronto's Major Streets Proposal?
The proposed changes on Toronto’s major streets include:
Getting rid of the Floor Space Index (FSI) rules. FSI measures how much floor space a building can have compared to the size of its land. For example, if the FSI is 2, the building can be twice as big as the land.
Introducing new setback rules. Setback is the space between a building and the property line, street, or other buildings. These new rules will vary based on factors like zone type, building height, length, and if there are windows. They ensure there’s enough space around buildings.
Implementing lot coverage rules. Lot coverage shows what percentage of land is covered by buildings or structures. If the lot coverage is 50%, it means half of the land has buildings on it.
In the R zone, there will be more flexibility with smaller setbacks and more relaxed lot coverage rules.
For details of these changes, please refer to Toronto Major Streets Study Final Report.
Development Charges On Toronto Small Apartments
When it comes to development charges, unfortunately, there haven’t been any improvements from the City of Toronto. However, there are some breaks available for investors and developers.
For instance, you won’t have to pay charges for the first four units, and there’s a possibility of delaying payment for the fifth unit if it’s a laneway suite or garden suite.
Projected Investment Returns: Small Apartment on Toronto's Major Street
Imagine you build a 5-plex (four stories with a basement apartment), each unit spanning 1,000 square feet and renting out for $3,500 monthly in Toronto.
With building costs around $250 per square foot and a lot purchased for $1 million, your total investment stands at $2.25 million. This setup translates to a solid 8% effective investment cap rate and incredible cash flows.
Considering market multi-family cap rates in Toronto at around 4.5%, this values this build at $4 million, offering a major value add investment lift of $1.75 million.
Another perk? Moving into the commercial mortgage space opens up possibilities, especially if you refinance with the CMHC MLI Select. This option allows you to borrow up to 95% of your property’s value and offers major real estate investing scalability in the long run.
Maximizing Opportunities: Investing Along Toronto's Major Streets
Why invest in properties along major streets in Toronto? Well, even if big projects aren’t for everyone, these properties have loads of potential.
Investors are catching on, and if the proposal goes through, expect even more interest. This could mean homes on Toronto’s major streets perform better than others in the long run.
How We Can Help
We’re keeping a close eye on these major streets developments in Toronto, and our investment sales team in Toronto has exciting plans for these lots.
Curious about our real estate investing ideas? Want to explore the best investment opportunities in Toronto?
Just book a call with us by clicking the link below!
What Toronto Real Estate Investment Is Right For You?
Check out our complete Toronto real estate investment guide for all the details and real-life examples. If you’re ready to dive in, just book a call with us!
