Judging by the numbers only, now is a superb time to become a Toronto landlord; yes, even with the high prices of houses in the GTA. The demand for homes to purchase may be higher than ever, but the need for rental units is off the charts. 

All across the city, tenants are facing “no vacancy” signs and soaring rental prices in response to the shortage. Anyone with space to rent can quickly expect a large pool of prospective tenants to choose from. 

The market may be growing more challenging for buyers, but Toronto real estate investors have never enjoyed more advantageous conditions. The question is, are you really ready to be a landlord? There’s a lot more to it than sitting back and collecting rent each month. In this post, we’ll take a look at what you need to know before diving into your next venture.

Positive Cash Flow Isn’t as Easy as It Seems

At last glance, a one-bedroom apartment averaged out at $2541 each month. A two-bedroom can command as much as $3,350, while renting a four-bedroom house exceeds $5,000, according to Zumper. With those prices, you might think that generating positive cash flow would be easy. And if you own a house that you bought five or ten years ago, you might be right.

However, high housing prices now, combined with rising interest rates, have made buying a house in Toronto more expensive than ever. When purchasing or adding to your portfolio in this market, you will have to analyze your costs carefully and be very conservative about your projected income. 

And let’s not forget about covering the cost for any time your rental unit sits vacant as you’re busy vetting and selecting your next tenant. But take heart; properties with cash flow potential do exist, and we are here to help you uncover them should you decide that being a landlord is something you wish to pursue.

Ready to take the plunge into real estate investing? The resources below will help you get off to a great start:

Pros & Cons of Real Estate Investing

Even with all of the ups and downs of the market over the last few years, real estate remains a relatively safe and solid investment vehicle. Even currency itself isn’t as stable. The Canadian dollar might plummet compared to the American greenback, but every dollar in real estate only gains in value over time. 

Case in point: The average price of a detached house in Toronto at the end of 2018 was $1,145,892. Back then, you could also add a nice little condo to your portfolio for an average of $594,381. Over the next few years, prices would go up and down in response to economic changes. But by the middle of 2023, average values soared to $1,785,128 for a detached home and $770,423.

If you bought in 2018 and sold in 2023, you could have earned $639,236 or $176,042 respectively, which doesn’t even include any rental income collected during that period. In either case, that’s not a bad return over just five years!

The Drawbacks of Real Estate Investing

As a long-term investment, real estate almost always produces a healthy return. It is definitely safer than the stock market, where all of your savings can evaporate if a company goes under. However, unlike the stock market, real estate can be more complex, and there’s a lot more to it than buying low and selling high.

Every day in between also matters, and there are repairs and maintenance to pay for, laws and bylaws to adapt to, and tenants to manage. If you’re trying to handle this all on your own, you will have your work cut out for you. 

The Rights, Responsibilities, and Headaches of Being a Landlord

As a Toronto landlord, both you and your tenant should be aware of your rights and responsibilities as outlined by the Residential Tenancies Act. In a nutshell, you have the right to collect your rent payments on time each month, to enter the property with reasonable notice, and to have the tenant not damage or vandalize your property.

In return, you must provide a safe and comfortable living space, avoid harassing your tenant, and cannot raise the rent beyond the amount approved by the LTB (Landlord & Tenant Board.)

When both the landlord and tenant respect these obligations, everything comes together in a perfect balance. When it doesn’t? Then corrective measures must be taken, and this is where many of the headaches of being a landlord begin. If your tenant refuses to pay or damages your property, you have recourse through the LTB. However, as with most government boards, nothing happens quickly. The best way to resolve most of these disputes is to prevent them from arising in the first place. 

Solutions to Common Problems

Choosing the wrong tenant is the biggest fear of real estate investors everywhere. While there are no guarantees, some basic background research can help you vet tenants to determine that they are a good fit. First and foremost, be sure to outline all expectations and obligations in writing that you and your tenant can both refer back to in case of a disagreement. 

Verifying with their employer allows you to see if they will be able to afford their monthly rent. As an added bonus, you can even get an idea of how long they will stay. Again, no guarantees, but a long-term employee can very well become a long-term tenant! 

Where should you invest? Often, you can’t go wrong near a school or in a family-friendly neighbourhood. Here are some ideas:

Take a Team Approach

The single best investment strategy we can offer is to never go it alone, especially since there are so many resources to help you along the way. From local real estate teams (like ours) to help you uncover properties with the most potential to property managers who handle the day-to-day operations, you can enjoy expert guidance at every turn to make your investments successful and free of headaches. 

Are you ready to learn more about the many investment opportunities in Toronto? Reach out today to david@batorigroup.com,  bobby@batorigroup.com or call (416) 485-7575 with any questions or to get started.