| Buying

When your house hunt is afoot, it’s essential to understand all your options, including the highly desirable but oh-so-challenging Toronto “tear down.” The trick to tear downs is finding an older home with a property worth more than the structure itself, allowing you to tear it down to make room for your dream home. Voila, you own a customized house in a neighbourhood with the best schools, mature trees, inherent character, an established sense of community, trendy shopping and dining, and a shorter, easier commute to work. 

Sound too good to be true? It can be! But it can also work out beautifully if you have the patience to make it through the process and put up with possible roadblocks. Here we take a deep dive into the Toronto tear down process to help you decide if it appeals to you. 

The Tragedy and Beauty of Tear Downs

The tear down is a bit of a conundrum: 

  • The beauty of the tear down is that it allows you to live in a desirable neighbourhood with plenty of character homes, mature trees, and a sense of history. 
  • The tragedy is that your tear down impacts the character of the neighbourhood you love. 

Tear downs also have a less-than-glamorous history. They were the bane of Toronto’s outskirt neighbourhoods like Willowdale and Lawrence Park in the 1990s, where sweet bungalows, Tudor cottages, and Cape Cod style homes on massive properties were torn down to make room for “monster homes” or “McMansions.” The fact remains, tear downs can provide an excellent opportunity for the right buyer.  

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Community Sentiment: There Goes the Neighbourhood

Although tear down fans might say today’s tear downs are aptly sized homes designed to limit their negative impact on the neighbourhood’s charm, locals will likely say this is not true. It just takes one tear down to change the entire character of a neighbourhood. As a result, we’re still seeing communities rebelling against tear downs – and the people behind them. And therein lies the problem when you go this route: You’re up against your neighbours. This can make your dream home feel a little icky knowing how its appearance impacts the community. 

If you find yourself up against a homeowner’s association, they will block you every step of the way. Older, close communities are vigilant at filing complaints and trying to stop builders and property owners from replacing structures or altering them in a way that will ruin the historic or original characteristics of their streets. 

Of course, if push comes to shove and you face an angry committee, you can help things go more smoothly by choosing a traditional exterior that complements the historical aspects of the neighbourhood. However, it might not be to your taste and your neighbours will still resent your “faux chateau.”  So, this is something you need to keep in mind when hunting for a tear down property. 

Tear Downs Can Be Complicated

It isn’t always about fighting your neighbours. Tear downs can also be complicated with a lot of red tape and paperwork. First, you have to check local zoning laws before considering buying the property, as different areas have different laws that can impact your design and what you can and can’t do. You don’t want to buy a home in an area where you are restricted by zoning. Paperwork, paperwork, and more paperwork, includes: 

  • Application to Construct or Demolish
  • Infill Public Notice Declaration Form
  • Owner’s Acknowledgement of Demolition Control Conditions
  • Municipal Road Damage Form along with a damage deposit in case of damage to existing road structures, sidewalks, laneways, etc. 
  • Schedule 1: Designer Information Form required when applying for Construction Permits
  • Tree Declaration Form where there is a risk to city or private trees on the property 

Completing all the required permits correctly reduces delays that can interfere with your tear down and rebuild plans. That brings us to trees…

Community Canopy

Another unexpected challenge is trees. As mentioned, you need a permit to remove trees on private property. This is to help protect the city’s canopy. Trees with a trunk diameter of 30cm or greater, measured at 1.4 meters above ground, or that are an endangered species are all protected. And if you don’t think anything bad can happen to you by damaging or removing trees, think again. If nosy neighbours report you, and you don’t have a permit, you can be fined $500 per tree and – wait for it — up to $100,000 in total. So, there’s that!

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Sniffing Out Tear Down Opportunities

Because tear downs have become more mainstream, most real estate agents will post their MLS listing as a tear down, potential to build, or even flag it with a heading like “Attention Builders.” However, when shopping for tear down opportunities for our clients, we also look for the following:

  • Minimal square footage and outdated everything with a large yard to ensure the house is worth less than the property  
  • Houses with structural challenges or that are “functionally obsolete” where repairs to make them livable cost way more than the value of the home and property
  • Houses that have sat on the market too long despite being listed below the average listing price

Unfortunately, a lot of these tear down ops are no longer listed at rock-bottom prices because owners and selling agents are savvy enough to market the property as a tear down. The way we look at it, the property needs to accommodate a home that will be valued at least twice the worth of the property’s current value to make it worth your while. 

Are Tear Downs Really That Much Cheaper?

There are too many factors to offer an absolute answer to this question. The size of the house you tear down, additional costs incurred to save the trees on the property, the size of the home you decide to build, and of course, the design and finishes all add up to very different totals. You also have to consider the costs incurred above and beyond the build, such as still paying for a home during construction. If you’re lucky, you can stay with family or friends, but this presents non-financial problems (imagine sharing a kitchen with your mother-in-law, for example). We could say demolition averages about $20,000 and building an average 1500 sq ft home costs about $400 per sq foot. However, very customized houses skyrocket over $600 per sq ft., and demolishing larger homes costs over $35k. That means you’re looking at a minimum of $620,000 on top of the property price. So even if you get a really good deal on the tear down at say $800,000, all in, you’ll pay about $1.4 million. BUT you’re getting your dream home in your dream neighbourhood. Considering the average detached house in Toronto right now is $1.53 million, it could be worth it. 

Financing Tear Downs

Even if you get your tear down at a bargain price, you need to consider financing. When approaching lenders, you need to explain your plans. They’ll have very special mortgages and criteria for tear downs. Ideally, you want to find a lender specializing in tear-down projects that work with interest-only payments to reduce financial pressures during the building phase. Remember, this isn’t like a traditional home purchase where you move in and have one mortgage to worry about. Instead, you’ll need to pay for housing while building your new home. Tear down and construction mortgages that allow you to pay the interest until the house is built reduce the financial burden of paying for the principal, so you have money to manage your living expenses and cover the costs of the build. 

These mortgages also offer the option to assume the payments with the principal included once the build is complete, or refinance to a traditional mortgage. Interest rates and terms vary; in most cases, they are considered higher risk than a conventional mortgage, so interest rates are also higher. The best-case scenario is for the lender to create a mortgage based on the value of your completed home, with a draw-based loan that works like a line of credit to cover building costs, followed by a traditional mortgage once the house is built.  

Tear Downs vs. Renovations

You might hit fewer roadblocks if you choose to renovate instead of demolishing a property. Because you’re maintaining the neighborhood’s integrity, you won’t deal with protests and also have far less complicated permitting and zoning. Some examples of how you can avoid a complete tear down include:

  • Maintaining a structurally sound foundation
  • A complete gut job that maintains the charm and character of the existing exterior
  • Additions to increase the size of small homes on ginormous properties
  • Retaining the most substantial elements of the existing structure, but adding your own design elements to customize the home

Most of these renovations allow you to “sidestep” red tape, restrictions, and local protests and still get the home of your dreams. However, the financial feasibility of renos versus tear downs tends to be the most important factor. Retaining the original charm and structure can cost more when the home is no longer structurally sound or requires so many updates that it will cost you less to tear it down and rebuild. 

Building a Secondary Suite on Larger Properties

You can also purchase a home with a larger backyard and build a secondary unit. However, these secondary units can be even more of a problem because there’s a good chance you’ll face damage or removal of trees and also impact your overlooking neighbours’ views. So, you have to:

  • Speak to City Planning and Urban Forestry to help develop a design plan that will protect trees on your property 
  • Consider a design that doesn’t interfere with the enjoyment of your neighbours’ property
  • Be prepared to face a lengthy approval process

You have two secondary suite options:

  1. Garden Suites: This is a self-contained unit located in the backyard of a residential lot, without a public lane, utterly detached from your house. 
  2. Laneway Suites: This is a self-contained unit located on the property of a detached house, semi-detached house, or townhouse next to a laneway. 

Both units must be used as residences, making them great for in-laws/adult kids or an excellent source of income via rent. 

Are You a Good Candidate for a Tear Down?

Ask yourself: 

  • Can I afford to carry the costs of a home, and still pay for the demolition and construction process?
  • Do I want to inconvenience myself and/or my family going through the process?
  • Can I wait for months or even a year to move into my home?
  • Would it be easier to go with a fixer-upper?
  • Do I have the patience and resolve to deal with neighbourhood pushback?
  • Can I live in an area where my neighbours might resent me?
  • Do I have a vision of what my home would look like?

If you answer yes to most of these questions, then you’re a good candidate for a tear down.

Consult the Experts

Information is your most powerful tool when buying a home. Before purchasing a tear down property, speak to a real estate agent. We can discuss your needs and home ownership dreams to determine if a tear down is a good idea. We can also help you find potential builders and designers to answer your questions, so you understand the entire process. Better yet, we can set up a meeting with clients who have been through the process to share their personal experiences. They can answer your questions, so you don’t go into a tear down completely blind. You can also investigate the Homeowners’ Associations in the areas you intend to shop to see how much pushback to expect when pursuing your permits, getting your plans approved, etc. Finally, we can refer you to a mortgage specialist to explain financing for this type of project. 

Call The Christine Cowern Team at 416.291.7372 or email us at hello@christinecowern.com with any questions you have about tear downs and Toronto real estate. We’d love to work with you!