Introduction
Are you wondering why some Toronto real estate investors choose properties that require more work before they’re ready for renters?
Well, it all boils down to the numbers. Crunching the math reveals that these projects often offer superior returns.
If you’re new to Toronto real estate investing, this concept might seem murky. That’s why we’re breaking down why these fixer-upper projects in Toronto can be so lucrative and how savvy investors make them work.
Initial Capital Requirements For Toronto Opportunities
When it comes to investing in Toronto properties, you typically have two options: you can go for a ready-to-rent resale home or opt for a fixer-upper that needs some TLC before it’s tenant-ready.
But here’s the catch: mortgage lenders often only finance the purchase itself, leaving you responsible for renovation costs upfront, which can be substantial. This might not sound appealing to newer investors, but hold on – let’s break it down.
Value-Add Lift For Toronto Investment Projects
In today’s Toronto real estate market with higher interest rates, borrowing money for renovations can be challenging. Consequently, the gap between renovated and unrenovated properties is widening. This means that if you’re willing to tackle renovations, you could see a significant increase in Toronto property value.
Consider this scenario: You have two investment opportunities. The first is a move-in-ready 3-unit Toronto house priced at $1.4 million. The second is listed at $1.1 million but needs $150,000 worth of renovations to match the first option’s condition.
Yes, the renovation project requires an extra $78,000 upfront, but the potential payoff is substantial. Based on current Toronto market values, tackling the renovations could add $150,000 to the property’s value.
Toronto Investment Property Cash Flows
If you choose not to refinance the property, you’ll likely enjoy better cash flow because there’s less borrowed money involved.
Net Capital Invested On Refinancing A Toronto Investment Project
Alternatively, refinancing post-renovation could bring cash flows similar to the turnkey property, with the added benefit of less capital tied up in the investment.
Additionally, renovating the property yourself may optimize space, attract higher rents, and reduce future maintenance costs, ultimately leading to better returns.
Key Benefits For Taking On Renovation Projects In Toronto
While taking on larger projects in Toronto may require more upfront capital, the increased property value and potentially improved cash flow post-renovation can make it a smart investment strategy.
Then if you do decided to refinance, you can do so earlier. This allows you to have more cash on hand so that you can pursue your next investment opportunity when the time is right for you.
How We Can Help
As spring brings more listings to the market, prices are stabilizing, making it easier for investors to make decisions based on solid numbers.
Curious about Toronto’s investment opportunities? Whether you’re interested in fixer-uppers or turnkey homes, our team specializes in finding and sharing the best options.
We’re not your average real estate brokerage.
We prioritize using data to drive better investment decisions, focusing on positive cash flow, risk management, and value-boosting strategies like renovations. If you’re ready to elevate your real estate game, schedule a chat with us today!
