We know you can make a decent income from Toronto rental properties. If you’re smart about where you buy, you can have your tenants cover your expenses and reap the benefits of building equity to boot. However, when buying Toronto real estate as an investment, you also have to weigh the pros and cons of becoming a landlord. Here we look at the good, the bad and the ugly sides of being a landlord in Toronto.
The Good: Buying Toronto Rental Properties is a Reliable Investment
For the most part, buying rental properties in the Toronto Area Housing Market is a reliable investment. This is because you are seeing gains in a few different ways. First, you have cash flow from your rent to cover your mortgage. If you invest in the right area, you might even make a little money you can put aside to cover upkeep and unexpected issues like replacing a broken appliance. Next, there’s appreciation. You don’t have to be an investment whiz to know the Toronto real estate market is always moving up. So, you’ll see appreciation in the value of your investment and can sell when it makes sense. Even if prices drop or stagnate, you only lose money if you sell below what you paid. Lastly, as you pay down your mortgage, your equity continues to grow. This provides you more buying power if you choose to invest in further properties.
The Bad: Finding Tenants and Possible Depreciation
Remember, you don’t cover your costs unless you have dependable tenants. This can be a challenge. You have to run ads, show the unit and then screen potential tenants with credit checks and reference calls. During this process you also want to feel safe showing the unit to complete strangers. Now, depending on how long you own the property you can also experience times of zero growth and less likely but still possibly, depreciation. But the beauty of rental properties in theory is you can hold onto the property and continue to see income from rent. That makes it easier to ride things out a few years if there ever a is downturn during the time you own it. Of course, if you lose a tenant, the rental market becomes saturated with tons of inventory, or you are not covering costs with rent, then this situation becomes a problem, and you’ll experience losses.
The Ugly: Eviction Challenges
You own the property, the tenant has to pay to use it, and if it doesn’t work out, they have to leave, right? Wrong. You have a lot more obligations as a landlord than your tenants do as renters. Even in the case where a tenant is not paying the rent, there are laws to follow before you can evict them in accordance with the Residential Tenancies Act. You can’t just change the locks and start looking for a new tenant. Even if you decide you want to live in your own unit, or it’s time to sell, tenants require 60 days’ notice prior to the lease’s end. The Ontario Standardized lease stops landlords from adding their own terms that take away tenants’ rights. In other words, you can’t make up your own eviction rules to tip the scales in your favour – even if the tenant agrees to it in the lease.
Toronto rental property investments can generate cash flow and equity, but not without a lot of sweat equity on your part. If you’re looking for a team of Toronto realtors to help build equity fast, the Christine Cowern Team’s got you covered. Give us a call at 416.291.7372 or email us at email@example.com. We’d love to work with you!