Why are amateur real estate investors so keen on condos?
I get how they’re easy, and I agree they’re great for their simplicity for those with stable and high incomes. But how would one ever scale a portfolio of condos without constantly scaling their job income?
While paying more in income tax, the higher one’s income gets…
Could it be condo agents and builders are just great marketers?
The new construction ones do offer around double the commission to agents as resale real estate does. It’s especially a great deal for agents since new condos sell for $1,700 per square foot, whereas resale condos are 1,200-1,400 per square foot…
How do agents invest?
Well, personally as Realtor of the Year to investors for four straight years, my daughter owns a duplex and my son a house rented to McMaster university students. That’s my preference for a higher return on investment: two types of Multifamily investing.
The Greater Toronto Area (GTA) is often viewed as a playground for real estate investors looking to find their next investment property.
After all, the possibilities are virtually endless with the wide range of properties available across such a diverse, interconnected group of towns and cities.
With so many options, plenty of new investors are unsure and hesitant to buy anything immediately.
Now, while the types of properties people are recommended to buy will change depending on that individual’s goals and investment strategy, there is something to be said for the appeal of multi-family properties in the region.
So, let’s talk about it. Here are the advantages of investing in multi-family real estate in the GTA.
A Growing Population
The population of the Greater Toronto Area is constantly growing, and with that growth comes an increased demand for housing in the region. This comes from the fact that Toronto already has the highest population of any Canadian city.
In 2021, the total population of the GTA was determined to be over 6.7 million people. This creates pressure to develop and build large multi-family residences to accommodate everyone.
Next, you have to consider the population density…How many people live close to each other, and how can you house them all in that space.
In 2021, it was estimated that in the GTA, the population density was roughly 942.4 people per square kilometre. However, in the city of Toronto, it was approximately 4427.8 people per square kilometre.
Over the years, the population density has been increasing.
In 2016, it was estimated to be 849 people per square kilometre in the GTA and 4334.4 people in Toronto.
When the population grows, two options are available to expand the city: outwards or upwards. However, outwards is often not an option with the cities and towns that comprise the GTA.
These cities and towns are built so close together that it is usually not feasible to expand them outward without running into another town’s boundaries.
This means to develop homes for the growing population, developers are building large apartment complexes and condominiums as opposed to single-family homes.
Multiple Income Streams
Another key advantage of investing in multi-family real estate is the ability to generate multiple income streams from a single property.
Creating multiple sources of cash flow through multi-family investing may not be exclusive to the GTA, but it is certainly worth acknowledging.
By purchasing duplexes, triplexes, apartment buildings or other multi-family units, you are allowing yourself to find multiple tenants to rent your investment property to.
This means you can anticipate multiple monthly rent payments to help cover any mortgages, insurance, utilities, property management or other recurring payments associated with the property while receiving more money in overall cash flow to help fund your lifestyle.
Of course, there is the risk of units becoming vacant and losing out on some of your monthly income.
However, unlike single-family homes which lose all of their income in the event of a vacancy, multi-family units will continue to produce income as long as some of your units remain occupied.
If you are investing in larger multi-family units, a smart strategy is to set your rent prices to allow you to cover your monthly expenses off a lower occupancy rate.
Doing this reduces the risk of losing money during tenant turnover periods, and when your properties are full, some of your units can be considered purely profit.
High Demand for Housing
Currently, Toronto and its surrounding cities have some of the highest levels of housing demand observed in Canada.
In January 2022, it was estimated that to keep up with the population increase, the Greater Toronto Area would need to build 30% more homes each year.
Of course, in order to begin meeting this demand, an obvious choice would be to build multi-family homes to maximize the number of new units created within the same amount of space.
Also, because the housing demand in the Toronto area is so high, rental prices have risen, allowing investors to generate more cash flow than they would have in the past.
Of course, this increased demand has also increased the listing prices buyers expect to see when entering the market.
While some people use this as an excuse not to invest, citing the desire to wait for the market to slow down and prices to drop, that is not always a reliable strategy.
For example, despite the 2008 recession, the median housing price in Toronto continued to rise. So, by allowing the current price of the housing market prevents you from investing now, you are running the risk of getting priced out of the market as property values continue to rise, even through periods of financial hardship.
Finally, the consistently high demand for real estate in the GTA can be quite beneficial if you decide to sell your properties at a later date.
In recent years, the demand for housing has gotten so high that buyers expect to compete with each other every time they make an offer on a property.
This means once you decide to sell, there is a strong chance that you may receive multiple offers above the listed price you set, increasing your overall profit.
Are You Ready to Invest?
If you are ready to begin investing in multi-family real estate or are simply looking to learn more about the world of real investing, today is a great day to start.
It’s time to continue learning how real estate investing can help you generate meaningful wealth and achieve true financial freedom.
So, come check out our monthly events and connect with our network of investors and real estate professionals.
Just fill out the form below to join my email newsletter, and you’ll receive the links to register in your inbox.
Until next time, I believe in you.
Happy Investing, Everyone!
Erwin
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