The chilling effect of the COVID-19 pandemic on the Canadian housing market is long gone. The competitive buying and selling of real estate, especially in the Toronto market, has returned, breaking previous records as homebuyers and investors regain their confidence.
Even though the supply levels in the housing market have also hit record lows, buyers are still competing for properties.
Clearly, with so much competition and little supply, breaking into the market isn’t easy. If you’re thinking of investing in real estate, you’re not the only one, said Anthony Liscio of Alto Properties, a multi-unit residential real estate company based in Toronto.
Investing in real estate is a daunting task requiring discipline and know-how, added Anthony Liscio, who has managed Alto Properties through both the ups and downs of the real estate market in Toronto. But if you succeed, Liscio said, the opportunities are there to boost your business and portfolio.
The combination of multiple factors — including lack of supply and the rising cost for housing — means that you’ll need to play it smart to get ahead.
For example, many investors enter the Toronto real estate market with lower-tier buildings that have a small number of units. Many people enter the market with buildings that have three to 11 units. The individual unit prices are higher because smaller buildings are generally more desirable, and are usually seen as the typical entry point for new investors into the multi-residential sector.
It’s easier for potential buyers to enter the market at that segment because your down payment although still high, is considered much more reasonable compared to what it would be if you tried to purchase something greater than 11 units. For example, if you’re looking at a building that has 18 units or more, you’re probably going to need a $1.5 million down payment, which is too high for many people.
If you’re trying to get into the landlord business in Toronto, you need to be looking at 3-unit, 6-unit or 11-unit buildings. That allows you to enter the market at a reasonable price.
Here are some other things to keep in mind as you wade into this complicated and competitive market.
Make sure your finances are ready to go:
If you’re trying to make big advances in this industry, you need to make sure you have the ability to buy as soon as a property becomes available. There’s just no time to wait.
If you need a loan, figure that out ahead of time. You need to know if this property is a good investment and whether the price is doable for your situation.
There’s a lot of competition out there, including for buildings that only have three to 11 units. We recently purchased a sixplex. The listed price was $1.98 million, but it sold in five days for $2.1 million.
Less than 10 years ago, the price per unit of a building like that would have been about $97,000/suite. That building would have cost $582,000 total. Now the building costs $350,000 a unit.
You have to be ready to pull the trigger and you have to be ready to pay more than expected.
Do the research:
It’s easy to get lost in the details, but research is essential. Try to take tours of several different properties in different neighborhoods. Compare the prices, locations, conditions, uses, possible future changes — everything.
Are you in a position to expand your business to a new location? If so, try to select a location and property that will benefit your current brand and services.
You’ve got to do your research. Always try to read and understand the nuances of the real estate industry, especially the tax rates, land inventory and potential environmental issues.
Always look at the interest rates of the areas you’re focusing on in your search for good properties. This affects the demand for both commercial and residential properties, as well as how much you can gain from purchasing it over the long-term.
Proximity is important:
This is one of the easiest tips: Try to buy a property that’s near office space and has easy access to transportation.
Transit is key. It directly impacts your ability to attract and retain potential tenants. The only way you can get a reliable return on your investment is to have people living in your multi-unit building. The more the property meets the long-term needs of your residents, the more you can rely on a steady flow of income every month.
Get help:
Try to find the most capable real estate agents to help you. These professionals have the experience and know-how to find the right property, negotiate the best price and keep you in the loop along the way.
Experienced real estate agents are available every moment of every day to answer your questions. That’s just what the Toronto marketplace requires. If you have trouble getting a hold of them, they’re not serious and they probably can’t help.
