The Best Real Estate Investing Opportunities In Toronto: Think Big Renovation Projects!

The Best Real Estate Investing Opportunities In Toronto: Think Big Renovation Projects!


At the beginning of the year, everyone wanted to buy real estate, and it would be a surprise to find a property without a bidding war. Now that prices have dropped drastically from the peak, most people are still nervous about the housing market, bidding wars are now a thing of the past, and many people still don’t think buying real estate is a good idea because they expect more downward pressure coming soon.

But here’s the thing: If you compare prices right now to early 2022, the numbers actually look a lot better from both the price and rental income standpoint today already. In our last video, we talked about how house hacking can be a much better financial decision compared to renting these days. In this video, we’ll share another top opportunity that we think makes a whole lot of sense these days: taking on big renovation projects.

How Much Have Returns Improved?

Let’s do some simple math to start. Detached home prices have dropped 27% from the peak in February in Toronto. Rents have also gone up at least 7% since February. So if we take out operating expenses and stack the net operating income against the purchase price, we end up with 50% better rental income yields compared to earlier this year, on top of being 27% ahead of those who bought in the earlier part of this year.

Think about it this way: If you buy today, you’ll benefit from the 27% price discount no matter what, so it’s already a better opportunity than earlier this year. But a big part of the higher rental income does get absorbed because interest rates are a lot higher today. And so, the numbers work the most in your favour if you have more cash and less debt.

Cash Flow Analysis

Now, you can get this if you buy a turnkey property and put down a higher downpayment. But putting in renovations is also another variation of going in with less debt and more cash.

Basically, what happens is that you can buy a property on the market for a cheaper price because it needs a lot of work. Your mortgage is based on the purchase price, so you end up with less debt than a turnkey property that sells for more. Then, you put in more cash for renovations, and so, both of these factors end up significantly dropping their loan-to-value ratio.

I’ve talked about how we’re seeing fewer new listings come on the market these days, and it’s really a combination of summer, when real estate normally slows down, and the market downturn, where sellers who can hang on are holding off and trying to wait it out. The sellers we see more of these days are those who really need to sell, and a lot of the listings that are coming on the market are those that can’t be rented out and need a lot of work.

So if you’re looking for the best opportunities these days, it’s probably those that require huge renovations. Going back to the example I showed earlier, you can see that because we have less debt on the property, once renovations are done and the units are rented out, cash flows will look much better on the big project.

Value Add Appreciation

But perhaps the bigger benefit of choosing a project to lower your loan to value ratio instead of buying a turnkey home with a bigger downpayment is the value-add potential. Demand has definitely dropped in general, but I’d say that the demand for big projects has dropped even more simply because not a lot of people have the cash these days to do so, even if they have the time.

So if you have the cash and the time to take on renovations, you’ll probably get a better deal. Going back to the previous example, instead of buying the house with the renos for $950K because it costs $200K to renovate, you might be able to buy it for $880K, and end up making an extra $70k by spending a few months managing a renovation project. 


Another benefit that we see with big renovations these days are the lower stress level compared to before. Home sales and renovation activity usually go hand in hand. These days, we are seeing fewer buyers which means fewer renovations and fewer existing home owners taking out HELOCs to renovate, and so renovations are dropping.

The housing market peaked in February, which means closings took place in April. If most renovations take around 3-6 months, we’re looking at around October when we expect contractors to have more availability, which ends up aligning with the time that you’d need contractors if you buy today. 

Being able to find contractors, having contractors focus more time on your project and being more likely to finish on time are all pluses, which reduces renovations headaches in the coming months. And so, this ends up being another benefit if you take on renovation projects these days. 

How We Can Help

Hopefully from this video, you can see why major value-add projects are one of our top real estate opportunity picks in Toronto these days. And if you’re ready to buy and you want to learn more about the opportunities we’d be happy to show you what they look like.

We’re a real estate sales brokerage and this is what we love to do. When you work with us, we’ll take the number to understand your profile and what you’re looking for. Once you’re ready, we’ll help match you up with the best investment property that fits your needs. After we help you buy it, our team also provides renovation guidance, leasing and property management if you need it. Just connect with us if you want to learn more about our services!

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We’d be happy to learn more about your situation and help you find the best investment opportunities for you.