Should I Buy an Investment Property in Toronto in 2022?
Warren Buffet loves quoting a long-held investment adage: when there is blood in the streets, that’s the time to buy. Don’t get us wrong; this is clearly not a literal statement. Warren Buffet was getting at that when people are not inclined to purchase for myriad reasons, and they are distracted from the real opportunities available to invest in. Toronto’s real estate market is going through its challenges right now. Housing prices are down, condo prices have softened, and rents are up, primarily thanks to interest rates climbing.
Rents Are Up
When interest rates go up, so do rents. Why? Affordability of homes declines. People have a more challenging time qualifying for homes that are on the market. There can also be anxiety, which leads people to look for controlled costs, certainly without the hassle of managing the costs of a home. We have seen rents jump in value this year. Landlords are happy! (remember when landlords couldn’t get tenants to stay at the beginning of the Pandemic? They had to incentivize tenants to stay or sign up.) Those landlords with investment properties coming up for lease are cashing in on higher rents.
We expect rents to remain high and continue to grow as Toronto’s housing affordability is too high for the average buyer. Also, the influx of new Torontonians annually will mean the demand for rentals will remain high in the years to come.
A Guide To Toronto Investment Properties
Values Down
Toronto’s home values have been down since the Spring of 2022. Condos have softened but not quite to the same degree as houses. What does this say? The average house is more expensive than the average condo in Toronto. There are more buyers for condos than there are of homes because condos are more affordable. With Toronto real estate values down, there is an opportunity for property investors to snap up some great triplexes and four-unit apartments and wisely select great condos.
It is worth acknowledging that values are down because the cost of carrying a variable rate (not fixed) mortgage has increased. This isn’t something to be too concerned with, as the adjustment of real estate investment value has decreased somewhat in proportion to the increase in interest rates. There is an opportunity to snap up some great spots that will grow in value in the years to come.
➤ Every good investment needs a well-planned strategy. Start preparing with the following:
- This Is The Year For Buyers In Toronto
- Are Condos A Good Investment?
- Why Parents Should Invest In Condos For Their Kids
- Condo Versus House Investment
- 4 Condo Investment Mistakes To Avoid
- Condo Purchase Checklist
ROI Will Go Up
If you’re going to buy an investment property, know that the return on investment (ROI) will increase in future years. Remember that there are two key measures to consider: the “cash on cash return” and the rate of return based on the purchase price. Most investors overlook the cash on cash return. It’s a great measurement to further asses how well the real estate investment is doing. Rents will increase, and that will cause the ROI will go up. Not to mention the appreciation that Toronto’s real estate market will see in the years to come.
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Key Takeaway
Should you buy an investment property? We are big believers in real estate investments. Investing in a Toronto property is a great way to increase your family’s overall wealth. The only way to truly do this well is to buy the best investments with the most significant upside and hold for the long term. If you choose to sell in time, we talk to our clients about reallocating the capital into another investment so that your money continues to work for you. We agree that you shouldn’t “fall in love with bricks” as there can be another opportunity around the corner. But, you must look at the investment property fundamentals and view this investment as a business. We take what we do seriously and encourage our investor clients to be decerning.
