How to Live Rent-Free in Toronto with This House Hacking Strategy

The idea of buying a house, splitting it into multiple units, and living in one while collecting rent from your tenants to live practically rent-free—what we call house hacking—has been a mythical concept in Toronto. 

But recent changes are making it more viable, especially for those looking to invest in Toronto real estate. 

Let’s dive into how things are shifting and how you can take advantage of this opportunity.

Why House Hacking Didn’t Work Before

For a while, house hacking in Toronto just didn’t add up financially. Even after investing in renovations, the best-case scenario was a small cash flow, maybe around $500 to $1,000 a month if fully rented out. 

The problem? That’s nowhere near enough to cover the unit you’re living in, which could easily rent for $2,200 or more. So, while house hacking was possible, it wasn’t perfect—you’d still be out of pocket every month.

Another major roadblock was the upfront capital required. CMHC financing was only available for houses under $1M, and renovation costs had to be paid out of pocket. This meant that even if you could house hack, you needed a significant amount of capital to get started, and you still wouldn’t live rent-free.

What's Changing?

Things are about to change, making house hacking in Toronto more practical:

  • Higher CMHC Mortgage Limit: Starting December 15, 2024, you can qualify for a CMHC-insured mortgage up to $1.5M, which opens up many more property options in Toronto.
  • Renovation Financing: Starting January 15, 2025, you’ll be able to borrow additional funds from CMHC to cover renovation costs, especially if you’re adding extra units to the house. This solves the renovation capital issue.
  • Improved Cash Flows: With lower prices and lower interest rates, cash flow on rental properties has improved significantly.

A Real-Life Example: Making It Work

Let’s take a semi-detached home in Toronto listed for $900K as an example. It’s a single-family home that can be split into three units with a $100K renovation. Once finished, the setup could include two 1-bedroom units and one 2-bedroom unit, generating around $7,200 in rent. If you live in one of the units, you could collect $4,500 in rent from the other two.

Before these changes, you’d need about $250K in capital to make this work, and even then, you wouldn’t live rent-free due to higher interest rates. Now, with the new rules, cash flow looks a lot better, and you’re only out about $400 per month if you stay in one of the nicer units. 

If you’re willing to sacrifice a bit and live in the basement unit, you could actually live rent-free—or even pocket some extra cash every month.

And if you’re tight on capital, there’s another option: with CMHC funding your renovation, you’d only need $145K upfront, less than half the original amount. If you live in the basement unit, you can still live rent-free!

Why House Hacking Now?

While living in the basement unit might not sound glamorous, it’s temporary. The idea is to sacrifice a bit now to set yourself up for long-term growth. With better cash flow, you can save more each month, build equity, and set yourself up for future investments.

But keep in mind, these favourable conditions won’t last forever. Right now, cash flows look great because prices and interest rates are low, but as rates continue to drop, prices will rise, and the cash flow might not be as attractive.

How We Can Help

If you want to explore house hacking in Toronto further or learn more about the new CMHC mortgage programs, reach out to us.

Our Toronto-based real estate brokerage specializes in multiplex properties. Whether you’re buying a ready-to-rent property, converting a space, or building new, we’ve got the expertise to guide you through. Here’s what it’s like to start as a client with us:

  • Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
    Market Search & Purchase: We’ll search the market to find the perfect property for you.
    Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll coach you as you manage the project.
    Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.

Ready to get started? Click on the link below, and let’s start working together!

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!