In Canada, any money collected from rent is considered income, thus subject to regular taxation. Increases in the value of your investment property (from the time it becomes an investment property to the time you sell it) will be subject to capital gains taxes.
If you’re thinking of buying an investment property, make sure to talk to your accountant (we can also provide one) to fully understand the tax implications.
Option 1: Investment Condos
Ever wonder who’s buying all the condos you see changing Toronto’s landscape? Investors.
This is why
A good investment condo will break even
(or be cash positive) with a 20% down
payment (which you require for a mortgage
anyway). Opportunity for both cash flow and appreciation in value over time.
The rental market is at an all-time low for vacancies, so finding a good tenant should be easy.
Generally less maintenance/repair work than being the landlord of a house
Unique condos in good locations have historically appreciated more than the stock market
Lots of obligations and little flexibility due to the Residential Tenancies Act.
Make sure to read our Complete Guide for Landlords for more information.
Works best as a long-term strategy.
Make sure to read our blog with all our tips about investing in Toronto Condos.
Option 2: Income Properties
Income properties: houses that have self-contained apartments that are rented out, are HOT, HOT commodities in Toronto.
Having a basement apartment that you can
rent out just might make the difference
between affording the home of your dreams and not.
At current interest rates, $1,000 in rent can cover over $200,000 in mortgage!
Historically, houses have appreciated faster than condos, so if you’re looking to make money when you sell, then an income property may be a safer bet.
With a 20% down payment on a multi-residential house, you should be able to break even (or ideally be cash positive)
If you’re living in the other upstairs (or downstairs) apartment yourself, you’ll need to cope with the noises and smells of your tenant
Landlord headaches: repairs, renovations, tenants that don’t pay their rent.
Having tenants in leases may make it harder to sell your home when the time comes.
Option 3: Flipping
Renovations always take long and cost more than you expected. With a flip, every dollar spent and every month where you have to pay a mortgage counts.
No matter what HGTV tries to tell us, flipping for profit isn’t easy – it takes a lot of time and can be a risky venture for someone who isn’t a contractor or tradesperson.
There are just as many examples of houses bought for $600,000, renovated for $150,000 and sold for $725,000.
If you’re considering buying a home to flip it, make sure you’re working with a REALTOR, who knows the game and can make sure you buy the right property, put the right amount of money into it for the neighborhood and sell it at the right time.
A proper quality flip in a good neighbourhood
will be in high demand (many of today’s buyers
want the fully done-up house)
Cash! There are certainly lots of examples of houses bought for $600,000, renovated for $150,000 and sold for $1,000,000
Buying a rundown house and renovating it for profit in under a year) happens every day in Toronto. It can be very profitable