Toronto Income Property Newsletter – Winter 2022

I read recently that a property for sale in Toronto had one hundred offers on it. Now let that sink in. One house for sale … 100 people that wanted it. This is just another news bite in a never-ending wave of stories about the craziness of our real estate market and the futility of trying to buy a house in Toronto. Not a day goes by that you probably haven’t heard something about real estate prices in Toronto.

So how does this affect the sale of income properties? Unfortunately, not very well. Cap rates and ROIs are essentially being tossed out of the window. With the push to acquire real estate at all costs in this city, buyers are doing some strange things. This includes in many cases overpaying to the point where all the investment value is sucked out of the equation. It seems like potential capital appreciation are what people are hanging their hats on, rather than making any sort of appreciable monthly or yearly return. And then that begs the question of why should you bother with real estate when there may be other more viable investment opportunities? Yet despite this, these income properties are selling for much more than what would have made sound fiscal sense in the past.

I see some buyers converting their duplexes and triplexes back to single family homes. The incidence of owner-occupied income properties seems to be on the rise too, as it has become so hard for many to find a place to live. It seems that get in at all costs seems to be the mantra, rather than trying to achieve a good bottom-line for yourself. For the past several years I have been advocating that if a property does not generate at least a 3.5 cap, you should pass on it. My opinion has always been that an investment property should be able to give you some sort of appreciable return each month. Since we are just starting open back up, it doesn’t seem to me like anything will change for the better until we fully get back to normal and interest rates can slowly start climbing up again.

– P.A.

Toronto City Council Introduces Garden Suite Program

Toronto City Council has released a press release announcing a program to allow residents to build garden suites on residential properties in the city.

Royal LePage predicts that GTA home prices will rise 11% in 2022

Expected rise in interest rates in 2022 “may not be enough to offset the significant upward price pressure” on homes.

What is an Acceptable Cap Rate These Days?

There was a time that investors wouldn’t dream of buying an income property unless it was a five cap. Nowadays that number can drop to under three.

2022 Legal Rent Increase

As of January 1st, 2022, landlords in Ontario once again are permitted to raise their rents. For 2022, Ontario’s maximum allowable rent increase is set at 1.2%. For the last two years, the legal rent increase was frozen due to Covid. As a landlord you must give tenants written notice using an N1 form in order to legally raise a tenant’s rent.

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