Toronto City Council Approves Multiplexes For All Toronto Houses In 2023!
It’s confirmed. All low-rise residential zones in Toronto will be allowed to build four units on the main house plus a house in the backyard as long as there’s enough space, and this is massive news for real estate investors in Toronto.
So in this video, we’ll go over why this makes a lot of sense and some other things to keep in mind. Let’s get started!
Why Multiplexing Makes Sense For Toronto Real Estate Investors
If you’re a seasoned real estate investor, you’ll know why cash flows are so important. They not only give you better rental income, but stronger cash flows also reduce your financial risk, which ultimately gives you stronger power to hold onto investments until you actually want to sell them.
The reality is that as our population grows and as we become more of a global city, the price of homes will go up, and eventually, we’ll probably see a growing percentage of renters, and when that happens, homes will be likely to be valued more so based on how much rent they can generate.
Most houses in Toronto are allowed at least one secondary suite, and building one would improve the rental income and likely the value of the home too.
For example, a single-family home might get $4,000 in rent, but with a basement suite, you might get $5,000 in rent. And so if we stack the two against market cap rates, which are around 4.5% nowadays, this could mean a $270,000 bump in value if we value it based on cap rates.
Key Change For Toronto Multiplexes
Obviously, 3 or 4 units could mean better rents and better home values, but not many homes in Toronto were allowed that until last week! Now, all low-rise residential zones will be allowed four units and a laneway or garden suite.
Other Benefits Of Multiplex Conversions
And there’s more: before this change, certain zones, like the R zone, actually already permitted multiplexes, but hefty development charges were another drawback that prevented investors from doing so.
Luckily, the city recognized this, and so scrapping development charges for up to 4 units is another huge step forward that makes taking on multiplex conversions even more attractive.
Another thing to keep in mind is rent control. Rents have been skyrocketing, but most residential rental units are subject to limited increases each year set by the Ontario government, and this year it’s actually a higher than normal 2.5% already. But once you stack that against market rent growth and overall inflation in Canada, it’s still not keeping up.
So here’s another reason why multiplex conversions make a lot of sense: when you build new units, they will no longer be subject to rent controls. So now you end up with better rents that can track market rents better, which ends up being great for rental income and also your property value.
Finally, you may or may not know that when you build a new unit for rental purposes, you can get HST rebates! This is not something new, but it’s something that we wanted to point out too. You would have to put the cash upfront for the HST, but you do end up getting a good portion of the HST back after it’s built, which is definitely a bonus.
I did do another video that outlines some of the key build changes that might be happening, and it really didn’t change much, so just head over to that video to review a summary of changes.
What Else To Keep In Mind When Searching For Multiplex Conversion Opportunities
A few more things to keep in mind are that it does look like the city is trying to be pretty flexible with this, and you can tell with the exceptions that they’re allowing.
For example, if you convert an existing house into a multiplex that might be bigger than the new requirements, you would be allowed to maintain the building form, so buying big existing houses would definitely be a plus.
Similarly, longer lots are a plus. If you have a deep enough lot, then your building depth also goes up.
One big thing with garden suites and laneway suites would be the presence of trees, which would make a project a no-go, but it seems like the city is being more flexible here too. If there’s a tree in the way, they might allow for extra building height to compensate for this.
How We Can Help
So all in all, we’re very excited about this new change because it does open up a lot more opportunities for real estate investors who are up for the challenge.
And if you want to learn more about how this might work or want our team to help you find a home that would work well with a multiplex conversion, don’t hesitate to reach out to us.
We’re a real estate sales brokerage focused on low-rise real estate investing opportunities in Toronto, and we’d be happy to share our wealth of insights. Just contact us to book a time to chat privately!
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