Toronto Real Estate Investment Guide: A Beginner’s Toolkit To Real Estate Investing

Toronto Real Estate Investment Guide

With so many properties on the market, it’s hard to find the right Toronto real estate investment for you if you don’t know the differences. Learn about your options in our Toronto Investment Property Guide so you can make better decisions!

A Beginner's Toolkit To Real Estate Investing In Toronto

Key Differences

Find out how much you need and the differences between properties.

Investment Returns

See typical returns of different types of rental properties in Toronto.

The Full Details

If you want to know more, this full comparison report was made for you.

What's Best For You

Take our investment quiz to find out what's the best property for you.

Key Differences

We broke down the key differences between the three major types of investment properties in Toronto: condos, houses, and commercial properties. 

We compare them based on price, capital requirements, mortgage requirements, active management, cash flows, market appreciation, and value-add appreciation.

Let’s get started!

Starting Purchase Price

Even though Toronto condos have the highest price per square foot, they have the least square footage, which makes the starting price the most affordable. Note that the price of properties can range significantly depending on their condition and features. Lower-priced houses usually requires an extra budget for renovations, whereas turnkey houses may cost 15 to 20 percent more than these starter prices.

Condo

$650,000
Higher price / sqft

House

$1,200,000
Average price / sqft

Commercial

$1,800,000
Lower price / sqft

Minimum Capital Required

The downpayment is calculated as a percentage of the property’s price, so Toronto condos generally require the least amount of capital. Besides downpayment, other upfront capital costs include initial renovations and closing costs like land transfer taxes and legal fees.

Because lower-priced houses typically require bigger renovations, the total amount of capital upfront is typically similar to what might be required for a turnkey property. However, you exchange your own efforts for additional value-add appreciation, and you’re likely able to refinance and grow your portfolio at a quicker pace.

Principal residences priced at $1 million or less can qualify for a lower downpayment percentage of between 5 and 10 percent with an insured CMHC mortgage.You may also qualify if you live in one unit of your home and rent another portion out. 

For those who need even more time to save up for their downpayment, pre-constructed condos (precons) may be a good alternative in Toronto. The downpayment for Toronto precons is spread over a longer period of time until closing, which can be one to three years away. Commercial properties, on the other hand, typically require a larger downpayment of 35 percent and larger renovations, raising the capital requirements on these investments.

Condo

$150,000

  • Min Downpayment $130,000
  • Min Closing Costs $20,000

House

$282,000

  • Min Downpayment $240,000
  • Min Closing Costs $42,000

Commercial

$700,000

  • Min Downpayment $630,000
  • Min Closing Costs $70,000

Loan-To-Value (LTV) Ratios

As noted above, commercial properties require a lower LTV of 65 percent and have higher interest rates compared to residential mortgages. Residential properties have a maximum LTV of 80 percent, and qualified principal residences may achieve lower interest rates and higher LTV compared to investments.

Condo

80% for investments
80%+ for principal residences

House

80% for investments
80%+ for principal residences

Commercial

65% for commercial mortgages

Active Management

Besides renovations, owning Toronto real estate investments requires leasing and property management, and this can vary depending on the type of property you invest in.

Condo

Fewer repair, maintenance and tenant issues when not covered by condo fees.​

House

Some repair, maintenance, and tenant issues similar to owning your own home.​

Commercial

More repair, maintenance and tenant issues due to a bigger property with more units.​

Cash Flows

Total returns come from a combination of cash flows, equity gains, and appreciation. Here’s how cash flows compare between different types of investment properties in Toronto. Condos have higher costs compared to other types of properties, primarily due to condo fees.

Condo

  • Less rentable space
  • Higher operating costs
  • 0 or negative cash flows

House

  • More rentable space
  • Lower operating costs
  • Positive cash flows

Commercial

  • Most rentable space
  • Lower operating costs
  • Higher positive cash flows

Market Appreciation

Historically, Toronto commercial properties and houses have better long-term appreciation compared to condos. Land is limited, which constrains the supply a lot more compared to condos. Moreover, when you’re purchasing in an area that hasn’t been redeveloped yet, there is a higher chance of a one-time bump in market appreciation from gentrification.

Because of a lower barrier to entry, there are more speculators in the Toronto condo market, which creates more price fluctuations. This added volatility in condos can mean higher returns if you enter and exit at the right times, but it also means added investment risk.

Condo

Lower appreciation with higher fluctuations​

House

Better appreciation with lower fluctuations

Commercial

Better appreciation with lowest fluctuations

Value-Add Appreciation

Value-added appreciation occurs when you renovate a property to increase its price. By doing the work yourself, you unlock value and increase investment returns. The more work a property needs, the more value-added appreciation you can unlock. 

Even though you can get higher value-added appreciation with more work, not everyone can do it successfully. Because of this, we recommend starting with easier projects to understand how it works before taking on bigger projects for a higher chance of success.

Condo

Limited due to few value-add work opportunities

House

Better due to more value-add work opportunities

Commercial

Best due to most value-add work opportunities

Are You Ready To Start Investing In Toronto Real Estate?

No matter if you’re looking for a house, condo or commercial property, we’re here to help you invest in Toronto real estate successfully.