Having your savings lying around for a rainy day is often not enough in today’s volatile and unpredictable market. That is why many people are turning to real estate investing as a way to diversify their portfolio and build wealth in the long term.
Real estate in Toronto and the Greater Toronto Area (GTA) offers a low risk and high-value investment due to the current housing market boom. Additionally, the population of the Toronto area is projected to increase to 8 million by 2030, which means that demand for housing is going to go up. As someone who owns real estate, you are likely to profit from increasing rental income, appreciating real estate values, and a strengthening resale market in the near future. An added bonus is the truly global nature of Toronto as an international hub for business, finance, and the arts; a factor that makes it an evergreen destination for working professionals, students, and immigrating families alike.
So if you are looking into real estate investing in the Toronto and GTA area and want a non-technical guide to help you understand the basics, we have you covered!
There are numerous reasons to invest in real estate, including a steady cash flow from rental properties and tax benefits due to government rewards for owning property. But before you head to the market or hire a real estate agent, you need to know what options are available and the pros and cons of each type of real estate investment.
The most common type of real estate investment in Toronto and GTA are condominiums. In fact, nearly 40% of Toronto’s condo owners are investors. This is a great long-term investment option with a low down payment percentage of 20% and appreciating value over time. Added to that, it usually requires little maintenance and repair work, which makes it feasible as a long-run investment strategy.
A second option is to invest in income property houses such as multi-residential buildings. These usually appreciate much faster than condominiums and provide a good source of cash flow and equity. However, as the landlord, you should expect to factor in repairs and renovations in your overall return on investment.
If you are just starting out and want to steer clear of potentially risky investments, consider investing in a home via a mortgage. This is an excellent way to kick-start your real estate investment journey. All you need is a good credit history, a steady income, and enough for a one-off down payment. You can live in your home which means that you save up on rent while simultaneously working towards owning your own home.
Another fairly common real estate investment strategy is to invest in property during the pre-construction period and sell it after its completion. This is great for those who want to make big gains from an up and coming location in the real estate market. However, it may require a considerable sum of steady investment in the form of regular fixed payments and may include risks such as cancellation of building contracts.
If you have ventured into the Toronto and GTA market, you know that flipping properties is common practice. It involves buying an undervalued fixer-upper home, renovating it, and then selling it for a profit. This requires a lot of time and effort and may be suitable for those who are prepared to take considerable risks to make some seriously big bucks.
You can even explore mixed-use properties that include both residential and commercial aspects. These can be extremely lucrative in the burgeoning localities of Toronto and GTA. It is best to hire a professional realtor to walk you through the legalities of the buying process so that you can accurately assess your potential returns and risk portfolio.
As a growing metropolis, Toronto and GTA attract an international market towards real estate investment. In fact, it allows both residents and non-residents the right to acquire, hold, and sell property.
However, as a foreign investor, you need to be mindful of both the federal and provincial laws pertaining to real estate investment. You will be happy to know that there are no restrictions on the size or type of real estate bought and owned by non-residents in Toronto and GTA.
Furthermore, before investing, it is important to clarify what non-resident means. According to Canadian law, the following constitutes as a non-resident:
● Those who normally live in another country and are not residents of Canada.
● Those who don’t have any residential ties in Canada including individuals who live abroad throughout the tax year and/or stay in Canada for less than 183 days in the tax year.
Before investing in real estate in Toronto and GTA, you need to know a few details regarding taxation.
You are likely to come across the Land Transfer Tax (LTT) which is paid by the buyer, be it a Canadian resident or non-resident. As a first-time homebuyer, however, you may be eligible for a rebate if that home is used as your primary residence. As a non-resident, you will have to pay an additional tax known as Non-Resident Speculation Tax (NRST) upon investing in Toronto and GTA. Other common taxes include annual property tax based on the value of your holdings and capital gains tax as your real estate property appreciates over time.
So before you invest in real estate in hopes of making a profit, be sure to factor in all the taxes that apply to you by consulting with a professional.
There are a multitude of benefits of investing in real estate in Toronto and GTA that include opportunities from gentrification to low price fluctuations. It is no wonder that this part of the world attracts so many investors!
Just remember to have in-depth knowledge about the real estate market and the laws surrounding it. And make sure you hire a lawyer to peruse all the important documents before signing. Having a good working knowledge of all the details will ensure a smooth sailing process and save you from any surprises.