Introduction
Investors are catching on: houses over condos. But within the realm of freehold homes in Toronto, there’s still a lot to unpack.
From detached houses to semis and townhomes – which is the better investment? Let’s break it down in this video!
Understanding Capital Requirements
When it comes to capital requirements, townhomes are usually the most affordable option. They sit on less land and share walls with two adjacent homes. Next up are semis, followed by detached homes.
Rental Yields
Here’s the deal: tenants often aren’t picky about whether it’s a semi, townhome, or detached. This means you can fetch similar rents for the same size house with an attached neighbour, but you buy with a cheaper purchase price. That’s why semis can yield better returns for a comparable house layout.
Notice I didn’t say towns, and this is because of one big consideration – entrances. It’s trickier to create separate entrances for townhomes compared to semis or detached homes because you don’t have access to the side or back as easily. This can limit the ability to divide the property into multiple units, which then limits rental income.
And this is why we typically prefer semis over towns.
Value-Add Opportunities
Many investors are drawn to diverse income streams and the potential to increase property value through renovations.
If you’re looking at cosmetic upgrades or simply rearranging the interior layout, whether it’s a semi or detached home doesn’t make much difference.
But when you venture into more significant renovations like underpinning or topping up a house, detached homes have the upper hand. You’ll need approval from your attached semi neighbour for any work on a shared party wall with semis, which can add uncertainty and risk to your project.
Rebuilding Under Toronto's Housing Policies
Taking renovations a step further, there’s a growing discussion around rebuilding under Toronto’s more lenient housing policies.
As of last year in 2023, each lot in Toronto allows a fourplex or a laneway or garden suite as of right. If you’re set on building a purpose-built fourplex now or in the future, go with a detached lot—it’s the straightforward choice.
But if you’re not planning on building but solely buying detached lots to bet on higher demand for build potential, it might not pan out as you expect. The reality is, there aren’t as many builders focused on these projects, and they’re typically looking for opportunities that offer significant upside because they’re going to be taking on the bulk of the work.
How We Can Help
As you weigh the options for investment properties in Toronto, it’s clear that each type comes with its own mix of pros and cons. Your decision should hinge on what aligns best with your investment strategy.
If you’re grappling with which route to take, our Toronto real estate brokerage is here to lend a hand! We specialize in buying and selling investment properties across the city, particularly houses and multiplexes.
Whether you’re interested in turnkey multiplexes or considering converting single-family homes into multiplexes, count on us to guide you towards smart investments.
Whether you’re eyeing a ready-to-go multiplex or need coaching to convert single-family homes into multiplexes, we’re here to help. 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: 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 support you through the whole process.
- 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!
