A Detailed Guide for Toronto

Real Estate Investors

The Basics of Investing: 


Getting a mortgage for a second property isn’t as easy as borrowing for your primary residence – you’ll need at least 20% of the purchase price for a down payment, and only a portion of the income you get from rent will be considered in qualifying you for a mortgage (usually 80%). For commercial properties, you’ll likely need a down payment of 50%.


If you are a nonresident-Canadian living abroad, your down payment should be 35% as per the current rules, you can get a mortgage based on the salary you make outside Canada. However, this varies from one country to another.


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.


What are your investment goals? There are three ways to make (or lose) money by investing in Toronto real estate:

Cash flow is the difference between what you collect in rent and the expenses you payout. In Toronto, cash flow positive properties (purchased with 20% down-payment ) are hard to come by, though it’s fairly common for investors to break-even on a monthly basis (meaning that the rent they collect is equal to the expenses they pay). Cash flow is affected by factors outside of the real estate market, for example, it depends on your down-payment and mortgage terms.

Cash Flow


When you sell your investment property for more than you paid, that’s called appreciation. For example, you buy a triplex for $1,000,000 and later sell it for $1,300,000, that $300,000 difference is the appreciation in the value of your investment. Toronto properties have historically appreciated favourably for investors.


When a tenant pays down your mortgage, you’re building equity. For example: you buy a property for $400,000 with an $80,000 downpayment and you apply the rent to the mortgage and rent it for 25 years. Eventually, you will have a mortgage-free property. When you then sell that property for $450,000, you’ll have built up $370,000 in equity (and you’ll get your original investment of $80,000 back).

Return on Investment (ROI)


Investors use different calculations and tools to calculate the returns on their real estate investments:

Cash flow

Is the net amount of cash moving in and out of an investment Calculation: Income – operating expenses – financing costs


Capitalization Rate

Is the rate of return on a real estate investment property based on the income that the property is expected to generate. Operating Income / Purchase Price

Calculation: Operating Income / Purchase Price


Return on Investment (ROI)

 A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.

Calculated by adding the cash return, mortgage pays down and appreciation.


Ready to Invest in the Toronto Real Estate Market?

As an investor in Toronto’s real estate market, there’s a lot to consider. If you want to partner with a team that knows how to evaluate investment options and maximize your ROI, text, call or send us an email.