How to Lower Risk and Improve Returns in Toronto Real Estate Investing!

When you’re diving into investments, it’s all about balancing risks and rewards. Here’s the lowdown: usually, the riskier the venture, the bigger the potential payoff.

Now, let’s apply this to real estate investing in Toronto: think leveraging, value-boosting projects, rental income, and appreciation.

But the real question is, can you minimize your risks while still get high Toronto real estate returns? Let’s dig in and see!



First let’s talk about leverage. This is when you use borrowed money to invest. 

When you make money with less of your money invested, then this can supercharge your return on your investment dollars, but watch out – it works both ways.  If things go south, your losses could be bigger too and that’s where the higher risk comes in.

So when you’re considering higher leverage to boost returns, we definitely recommend a long term investment horizon and have your incoming rents be able to at least cover all of your outgoing payments each month, operating expenses and your mortgage, so that you can ride out any bumps in the market.

Value-Add Return

Now, onto those value-add projects. I’m talking about sprucing up run down properties or converting single family homes into multiple units – Toronto is perfect for these projects because we have lots of old homes and a policy that encourages a lot more house density only in Toronto. 

Houses that need work costs less, and the money you spend on renovations could be less than the difference in price, giving you value-add return. 

There’s a risk – renovations can have surprises, like delays or going over budget, especially if you’re new to it. These surprises can eat into your returns or even leave you losing money. 

But if you finish the renovations on time and on budget, that’s when you could see a big payoff. That’s why many experienced investors take on value-add projects because they’re able to cut down on renovation risk.

rental Income

When it comes to rents and appreciation – they both depend on where you’re investing and how developed that area is. And how we measure rental return isn’t just about how much in absolute dollars you’re getting. 

Sure, in higher value areas, you’d expect higher rents. But to compare apples to apples, you’d actually want to look at rent yields – how much rent you’d get compared to your property value. And when you look into this, you’ll notice that rent yields vary a lot depending on where you are in Toronto. 

Fancy neighbourhoods have people willing to pay a lot to buy a house there, but what you’ll notice is that rents don’t change as much. So in cheaper areas, you typically get better rental returns.

But at the same time, you should take into account rental risk and it’s true that your tenant pool (more specially, how much they tend to make) will change too. You might think that higher yields mean higher tenant risk – but that’s not an absolute truth. 

The quality of tenants isn’t just determined by their income; it’s about finding renters who respect your property and pay rent on time. Getting a tenant with high income doesn’t guarantee that you will have a great tenant that pays rent and will take care of your place. 

The most important thing is to check that they have enough income to support the rents you’re collecting, check their credit and references – basically, doing your homework here can reduce your rental risk.


Last point – let’s talk appreciation and this is also location dependant. In up-and-coming neighbourhoods that are gentrifying, property values tend to shoot up quicker as they catch up to the more established areas – and that would mean stronger appreciation returns for you if you’re investing in these areas. 

From a risk standpoint, I’d say gentrifying areas are higher risk because of bigger price swings because these typically are more starter home areas. When the market is doing well, these properties can go up in price a lot. But when the economy isn’t doing so great, it’s tougher to buy, so prices end up dropping more. Just like leverage, you’ve got to be okay with the bigger ups and downs and think about the long-term potential to get better returns.

Final nugget for you: there’s a big difference between an underdeveloped area and gentrifying area in Toronto, even if prices aren’t far off. Definitely avoid investing in areas that that lack demand, which won’t attract as much development, which leads to slow price growth. 

On the flip side, in gentrifying areas, people want to move there, there’s more plans for development and that’s why there’s the higher expected growth in these areas.

How We Can Help

Here’s the bottom line: on the surface, If you want less risk, you usually get less reward. But once you start understanding more about your risks, then you might end being able to dial down your risks while still maintaining the higher returns. 

How you do this is to start by learning —watch videos like this one: check! Then you need to just do it – but get help from experts and coaches, do your homework. And then do it again. The more you do it, the better you’ll get!

We’re a real estate sales brokerage that specializes in buying and selling homes and we focus specializing in multiplexes – and we’ve done over and over again, and what we’re really good at: either buying multiplexes in Toronto that’s ready to rent out on day one, or we can also coach you to turn houses to multiplexes. 

Ready to get started with Toronto real estate investing? Just head to the link below and let’s make it happen!

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!