Toronto Income Property Newsletter – February 2010

The Toronto duplex and triplex market is off to a strong start in 2010. The demand that we saw last quarter hasn’t subsided at all. Multiple offers and sales over asking price are still the norm. Even though it has been cold, there hasn’t been a lot of snow. This makes it a lot easier for us realtors to get out there and show properties. Interest rates are also still very low. If you are thinking about getting into the income property market, I’d do so now to take advantage of these attractive borrowing rates. To discuss this further with me, please don’t hesitate to get in touch.

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Nowadays, cap rates in between 5 and 5 ½ are quite common. Is it unreasonable to expect such a low rate of return on an income-generating property? For the seasoned investor the answer may be yes, but certainly not for the first time live-in investor. Owner occupiers often get the locational benefits of a great neighbourhood without paying the same net mortgage as their single family neighbours. This is a fantastic way to get into an area inexpensively and still enjoy a potential capital gain sometime in the future.

If you can’t afford the net out-of-pocket costs in an income property where your tenants pay upwards of 60% of your mortgage, then you might want to reconsider living in downtown Toronto. It seems nowadays that any decent duplex or triplex is going to trade for over $500,000. Unfortunately, market rents haven’t risen commensurate with house prices so our overall returns have dropped. It still makes sense for the owner-occupier to look at these income properties, so long as their out-of-pocket each month doesn’t exceed the market value for the suite they are occupying. I suppose the days of live for free are long gone, but living for market rent with only 10% down is indeed still a possibility.

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2009 was a banner year for income property sales in the GTA. Whilst the year got off to a slow start, by May business was booming. As I commented throughout the year, multiple offers and over-asking bids were commonplace. Now obviously not all income properties sold for over-asking price – there were some duss in there. Yet it seemed that all the good ones (great locations not needing a lot of work), always were in high demand.

For my year-end wrap up, I have selected a group of sales from 2009 from four distinct neighbourhoods. Please click the link below each to take a look at ten sales from 2009 that illustrated the intense demand for properties with lat least three kitchens.

E01 – Riverdale & Leslieville

http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130637.002800&t=l&fm=F

C01 – Downtown west of Yonge, South of Bloor

http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130694.002800&t=l&fm=F

C02 – Downtown east of Yonge, North of Bloor

http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130737.002800&t=l&fm=F

W01 – Roncesvalles & High Park

http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130819.002800&t=l&fm=F

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