Monthly Newsletter: September 2005

This month I’d like to start by welcoming Neil Spiegel to our Plex team of income property specialists.  Neil has extensive experience in construction and property management, as well as a very strong knowledge of the residential investment market in Toronto.  As both an owner and manager of several income properties over the years, Neil will be a strong asset to buyers and sellers looking to become active in the income property market.  He will be concentrating on the west side of the City.  Neil can be reached at neil@plex.ca  I’d also like to welcome back Shannon Long who has just returned to work after a few weeks off.

One of the areas that we are most active in is owner-occupied income properties. Many of our clients realize that it makes sense to rent out a portion of their homes to help pay down their mortgage. That’s why duplexes, triplexes and even houses with basement apartments are always popular. When we search for these types of properties, there are two things that I focus on. The first (and most important in my opinion) is the comfort of the owner’s suite. The amount of money that is generated from the other units (and the overall fiscal attractiveness of the property) comes second. If you are living in a suite that doesn’t suit you then it doesn’t really matter how much money you are saving. It is important that an owner’s suite have all the minimum features that make you happy to live in that unit. If you need two or three bedrooms, parking, ensuite laundry etc. and these are things that you absolutely can’t do without, then you shouldn’t sacrifice them. There are many beautiful suites in some of the income properties that I have come across. In some cases some suites in higher-end income properties are like opulent hotel rooms. Some offer more living space than complete homes. I often get asked where you find these “over-the-top” buildings in Toronto with great rental units.

This month I’d like to look at where the best opportunities are to purchase a property in Toronto to live in and get high rents. We will also informally survey the high-end income property sales in Toronto so far this year.

From a rental property perspective, a property close to the subway line, restaurants and shopping tend to be more desirable to both to owners and renters. Other factors that high-end renters tend to look for are proximity to the more prestigious schools, sports clubs, etc. Properties close to the middle of the city – Yonge Street from Bloor Street all the way up to York Mills – get the highest rents. Other areas like the Beaches or High Park that have strong locational benefits are also very attractive to renters who are looking to pay a little more.

Where are the nicest income properties in town? Almost every exclusive neighbourhood in Toronto has duplexes and multiplexes mixed amongst the single-family homes. There is always activity in the high end income property market. You may not think about spending over a million dollars in Rosedale or Forest Hill but there are many homes in these areas that have fantastic rental suites in them. Key streets include Madison, Lowther, and Admiral in the Annex and streets like Maple & South in Rosedale. Sometimes suites can rent for as high as $4500 a month in these properties. That may seem like a ridiculous amount of money to pay on rent, but believe me, there is a market for these kinds of rentals.

We recently conducted an independent survey of all the upper-end income properties in Central Toronto to see where the marquee locations are. We looked at all the Central MLS districts and correlated sales price and number of properties sold. Here’s a breakdown of all the income properties that have sold so far this year in different parts of the Toronto for over $750,000. Our criteria are simply that the property listed has to have had three or more kitchens – this will exclude many of the luxury duplexes in these areas since they would only have two. We have cut the city into ten distinct regions based on MLS districts. For illustrative purposes I will describe some of the nicer neighbourhoods below in each of our chosen districts. These are generally considered to be the most exclusive areas of our city and comprise the most expensive real estate.

C01 – includes the Lower Annex, College Street, Chinatown & the downtown core

C02 – includes Upper Annex, Yorkville, Rathnelly & Deer Park (Yonge & St. Clair)

C03 – includes Chaplin Estates & Forest Hill

C04 – includes Cedarvale, Allenby, & Lytton Park

C09 – includes Moore Park & Rosedale

C10 – Includes Lawrence Park, Leaside & Midtown (Yonge & Eglinton)

E01 – Includes Riverdale & Leslieville

E02 – Includes The Beaches

E03 – Includes Playter Estates & Danforth Village

W01 – Includes High Park, Bloor West Village & The Kingsway

District YTD # of income properties sold Avg. Price (sales above $750K)

C01 18 $850,049

C02 50 $1,183,230

C03 25 $1,024,376

C04 18 $930,828

C09 13 $1,525,077

C10 13 $934,455

E01 5 $799,900

E02 12 $1,108,067

E03 2 $859,000

W01 15 $863,593

These statistics show us that live-in owners and investors are comfortable paying big dollars for upper-end investment properties. Since most of them will not yield a strong cash-on-cash return, I’m sure they’re being bought based on location and the hope of eventual capital appreciation. Cap rates don’t generally apply to high end rental properties.

One other area that we haven’t included in the above districts is prime Cabbagetown which occupies a small portion of C08. There have been some very nice duplexes and triplexes that have sold, particularly east of Parliament close to the Riverdale Farm. It seems like this section of town is beginning to closely mirror Riverdale on the east side of the valley.

One final note: The hurricane this past week in the Gulf Coast was devastating and the after-effects have been unimaginable. As I talk about million dollar income properties, I can’t help but think about all those who have lost their homes. Over the next weeks and months, it’s going to take a monumental effort to help these people get their lives back in order. If you are able to help out in any way possible or are able to contribute to relief funds, please do so. At this early juncture, one of the best things we can all do is to donate to the Red Cross. www.redcross.org

It’s the Labour Day weekend, so that means back to school, back to work and the wind-down of summer. I expect a very robust fall market, even though rates may start to rise based on the macro-economic effects of this past week. There should be a lot more new exciting inventory to check out and I’m sure that we still have a few more warm days ahead. And don’t forget to check www.plex.ca for our up-to-date choices of the best income properties our market has to offer.

Be well.

P.A.