Rent Your Toronto Condo

June 20, 2018 – Toronto investors have found great success renting condos in Toronto.  Even with the high cost of Toronto real estate, there is good money to be made in the Toronto condo market.  If you are looking to rent your Toronto condo, Ralph Evans has helped his investor clients to buy, to sell and to find good quality tenants to live in these properties.  Here are a few ideas to consider…

Free Cash Flow

We hear a lot about investing in properties from The United States and from investors in other places.  They always speak about the need for positive or free cash flow.  That is to say the property is paying you cash money  every month.  Well, this just doesn’t happen in Toronto, but that is okay.  The one unique feature of our real estate market is the tremendous price appreciation in property values that the City experiences.  While there may be short-term fluctuations in value, the longer term trend points to a continued upward march.  The key driver of this is the continued migration of people to Toronto from around the world.  Free cash flow is not possible until 35% to 40% of the mortgage has been paid off.

When you rent your Toronto condo you will benefit from both the cash flow as well as the capital appreciation in the property.  Most other cities don’t have this net inflow of population.  Thus, they only focus on the cash flow.  Here we have the much more lucrative capital appreciation to reward us in the future.

Your Tenant is Paying the Mortgage

Toronto is full of young people with good paying jobs.  Law firms, banks, insurance, investment, government, marketing, supply-chain, engineering and more recently technology firms of all sorts have large work forces.  The best companies are located in the downtown core.  These young people may not be ready to purchase a place of their own yet, but they are earning a good salary and can afford to pay your mortgage for you.  So, while your property is gaining value, your mortgage is being paid for you.  Eventually you will be sitting on quite a nest egg!

How Much to Invest?

Canadian mortgage rules specify that investors must put down an absolute minimum of 20% of the purchase price.  CMHC mortgage insurance is not offered to investors, so the banks are unable to offer mortgages below the 20% threshold.  If you have the ability to increase your equity above the minimum, you are going to see better cash flow.  If you are investing at the minimum then you should expect to be topping up the monthly payments to cover the mortgage, condo fees and property taxes.  You will need to qualify for this mortgage financing on your own financial situation too!

Finding Good Tenants

Ralph is able to advertise your Toronto condo for rent through the MLS computer system.  There are other tenants working with real estate agents to find a place to rent.  Generally, this attracts a better tier of tenants, but that is not enough.  Ralph will help you to further screen the applicants – looking at their employment and credit history.  Once the right person has been found, a comprehensive lease agreement is put in place to best protect your interests and to protect the property too!

Wash, Rinse and Repeat

Now how good would this be if you were to take your first condo investment property and refinance the mortgage, taking out some of the accumulated equity and using this to purchase another investment property!  Now you would have two condo’s each seeing good price appreciation, with tenants paying your mortgage for you.  Want to try for three?