If you’re buying your first Toronto multiplex, a good turnkey property can make you more money than a renovation project. That might sound strange coming from us, because most of the properties we take on are projects.
There’s a good reason we do them. When there’s a big gap between what you pay for a Toronto house and what it’s worth once it’s done, and you keep the reno budget well under that gap, you make real money. But the gap has to be big, and on a lot of projects it isn’t. First-time investors often buy the wrong property or do the wrong renos. And on a smaller project, the finished value usually lands at about what you paid plus construction, plus a bit. That might be a lift of only $50,000.
So is that worth it, if a turnkey could make that back in rent before your project even has its first tenant? We ran a real turnkey deal and an average reno project side by side to find out.
Why a Renovation Project Needs More Cash Upfront
On a Toronto renovation project, a conventional mortgage covers up to 80% of the purchase price. That means 20% down, plus closing costs. Then most investors pay for the renovation upfront in cash.
Once the work is done, you refinance at the new value to pull some of that cash back out. That’s the big appeal of a project. But until the refinance, a lot more of your money is tied up than it would be on a turnkey.
A turnkey is different. It’s already rented and ready to go. You put 20% down plus closing costs, and the tenants start paying you from the first month. There’s no reno budget to fund and no waiting for a refinance.
Rent Yield: Why a Good Turnkey Earns More Per Dollar
Rent works against a project too. You pick a good Toronto turnkey because it’s a great deal: strong rents at a lower price. That gives you a better rent yield than the average multiplex.
A project works the other way. You’re aiming for a market value when it’s done. So even if the finished rents are close to the turnkey’s, the value is higher, and that pushes the rent yield down. When you refinance at that higher value, your bigger mortgage sits on a market rent yield, not a deal.
Rent yield, or what we call cap rate in real estate, is the easiest way to compare two properties with different prices and rents. Take a year of rent after expenses and divide it by the property’s value.
| Turnkey: $76,452 ÷ $975,000 | 7.8% |
| Project when done: $70,104 ÷ $1,050,000 | 6.7% |
For educational purposes only. Actual figures and returns may vary.
That gap of about one point shows up in your cash flow every single month.
Turnkey vs Project: The Numbers Side by Side
Here’s a great turnkey deal we found for a client recently. It’s important to know this is not a typical turnkey. It’s a very good deal, bought under $1 million and already rented.
The Turnkey: 3 Units, Rented From Day 1
| Purchase price | $975,000 |
| Down payment (20%) | $195,000 |
| Closing costs | $33,450 |
| Cash to get in | $228,450 |
| Mortgage ($780,000 at 4.50%, 30-year) | -$3,933/mo |
| Unit 1 (3 bed) | $2,392/mo |
| Unit 2 (3 bed) | $2,440/mo |
| Unit 3 (3 bed, lower) | $2,823/mo |
| Utilities, property tax and insurance | -$1,284/mo |
| Monthly cash flow | $2,438/mo |
For educational purposes only. Actual figures and returns may vary.
The Project: An Average Renovation in St. Clair West
Now compare that to an average reno project: a $900,000 detached house in St. Clair West that needs a $100,000 renovation to become 3 units.
| Purchase price | $900,000 |
| Down payment (20%) | $180,000 |
| Closing costs | $30,450 |
| Renovation (paid in cash) | $100,000 |
| Cash to get in | $310,450 |
| Unit 1 | $2,500/mo |
| Unit 2 | $2,500/mo |
| Unit 3 | $2,000/mo |
| Parking | $100/mo |
| Utilities, property tax and insurance | -$1,258/mo |
| Cash flow once rented, before refi ($720,000 mortgage, -$3,630/mo) | $2,211/mo |
| Refinance at 80% of $1,050,000 | $840,000 |
| Cash back on refi | $120,000 |
| Cash left in the deal | $190,450 |
| Cash flow after refi ($840,000 at 4.50%, 30-year, -$4,235/mo) | $1,606/mo |
For educational purposes only. Actual figures and returns may vary.
The project needs about $80,000 more cash to get in. After the refinance, it leaves about $40,000 less of your money in the deal. But the bigger mortgage drops your cash flow to about $1,600 a month. That’s the difference in rent yields showing up. You can plug your own numbers into our investment calculator to compare deals the same way.
| After the Refinance | Turnkey | Project |
|---|---|---|
| Cash to get in | $228,450 | $310,450 |
| Cash left in the deal | $228,450 | $190,450 |
| Monthly rent | $7,655 | $7,100 |
| Rent yield | 7.8% | 6.7% |
| Monthly cash flow | $2,438 | $1,606 |
For educational purposes only. Actual figures and returns may vary.
The Hidden Costs: 7 Months of No Rent and Appraisal Risk
On top of weaker rent yields, a project comes with a stretch of no rent at all. A Toronto renovation like this takes 3 to 6 months at least, plus time to find tenants. The whole time, the house sits empty. You’re still paying the mortgage, property tax, insurance and utilities, about $4,900 a month here, while a turnkey collects rent from day 1. If the project runs late, that bill keeps growing.
Add 6 months of renovation and about a month to find tenants, and the project goes 7 months with no rent. By then, the turnkey is about $51,000 ahead. That’s basically 7 months of rent the project never collected.
What If the Appraisal Comes In Low?
One more thing makes a project riskier, even if you’re experienced and have a great contractor. It depends on one number you don’t control: the appraisal. The bank values the finished Toronto property based on what similar ones have sold for.
| Project Refinance | The Plan | Comes In Low |
|---|---|---|
| Appraised value | $1,050,000 | $1,000,000 |
| Lift | $50,000 | $0 |
| Refi mortgage (80%) | $840,000 | $800,000 |
| Cash back on refi | $120,000 | $80,000 |
| Cash left in the deal | $190,450 | $230,450 |
For educational purposes only. Actual figures and returns may vary.
If it comes in at $1 million, which is possible in an uncertain market, that’s right at what you put in, and the lift is gone. You’d have about $230,000 stuck in the deal, about the same as the turnkey. Except you did all the work, went 7 months without rent, and still end up with lower cash flow. If you want to see how real projects have turned out, see what Toronto multiplexes really cost and earn.
When a Renovation Project Is Actually Worth It
A project only works when it’s a good project. The reason can’t just be a $50,000 lift. It has to either cash flow clearly better than a good turnkey, or have a much bigger lift.
| Gap between purchase price and finished value | $500,000 |
| Renovation budget | $200,000 |
| Lift | $300,000 |
| Cash out at an 80% refinance | About $400,000 |
For educational purposes only. Actual figures and returns may vary.
With a gap like that, you pull out enough cash to fund your next project right away. That’s when the lift is worth the work, and it’s why we do these ourselves. We just don’t think your first property is the place to learn, because the lessons show up as late builds, budget overruns and appraisal surprises.
To be fair, a turnkey isn’t risk-free either. You’re buying someone else’s renovation, so check these before you buy:
| Get a Proper Inspection Don’t rely on nice listing photos. An old roof, furnace or wiring can turn a turnkey into a surprise project fast. |
| Check the Leases If the tenants pay well under market rent, the rent you’re buying might be hard to grow. |
| Ask What’s Been Updated Find out what work was done, when, and whether it was permitted. |
What Should You Do?
1 | Buying Your First Toronto Property Buy a turnkey that cash flows well. Learn how to be a landlord while nothing’s on fire, and let that cash flow build your reserves. |
2 | Already Own a Property or Two Now a project can make sense. Skip the cosmetic renos and simple conversions where the gap is too small. Look for a great buy or a bigger project with a big gap and a reno budget well under it. |
Want to see the kind of deals we’re finding right now? Check out our latest Deal of the Week.
Turnkey First, Projects Later
Our honest take: turnkey usually wins on cash flow, and projects win on lift, but only the right projects. A small $50,000 lift can disappear in 7 months of no rent, a low appraisal or a late build. A good turnkey pays you while you learn.
Telling a great project from an average one takes the right team and the right lens. That’s what we’re here for, whether you’re buying your first turnkey or looking for a project with a gap big enough to be worth it.
Our brokerage specializes in Toronto multiplexes. We’ll help you find deals, crunch the numbers, and guide you through renovations and management. If you want full support in Toronto multiplex investing, our team can help you:- Find high-potential properties
- Crunch the numbers so you know exactly where you stand
- Coach you through renovations to maximize returns
- Lock in great tenants
- Provide full property management so your investment runs smoothly
What do Toronto multiplexes really cost and earn?
We pulled the numbers from the 50+ deals we worked on in the past year: build costs, rents by unit type, and how the refinances came out. Free, and no best case.
This is for educational purposes only; it does not guarantee future performance or serve as financial or tax advice.
