Investment FAQ

GTA Real Estate Investment

GTA Real Estate Investment

Real estate investors continue to flock to Toronto and the GTA from all over the world. In Toronto, prime high rise condo building prices start at approx. $1000 per square foot (resale condominiums) and go up to $1500 per square foot (pre-construction/new builder luxury condominiums), as of Aug 2023. The average price of homes & condos can be seen in Toronto Regional Real Estate Board (TRREB)'s GTA real estate market reports.

In comparison, in Downtown Mississauga, resale high rise condos in prime buildings start at approx. $800 per square foot and go up to $1200 per square foot for pre-construction/new builder luxury condominiums, as of Aug 2023. Toronto and Mississauga offer a safe real estate investment for investors looking for a second or third home in two of North America's most diversified cities.

Deciding Between Mississauga Condo Market and Downtown Toronto Condo Market

Selecting between the Mississauga condo market and Downtown Toronto condo market hinges on personal preferences. Both markets exhibit strong demand for rental units and attract a similar caliber of tenants. Opting for an investment property in proximity to one's residence makes practical sense. 

Additionally, a noteworthy aspect is the cost disparity. Properties in Downtown Toronto command a premium of nearly $80K to $100K compared to similar properties in Mississauga. For investors, securing the maximum value for their investment is paramount, and opting for a property of lower value can prove to be a more judicious decision.

If you have invested in financial markets, such as stocks, mutual funds etc. and are considering diversifying into real estate, we are here to provide assistance. Our services encompass not only the acquisition of promising investment properties but also finding great tenants to ensure optimal returns. Furthermore, we go the extra mile in aiding your property management needs by linking you with contractors including handymen, plumbers, painters, flooring professionals, electricians, HVAC contractors, and more.

Some FAQs:

What Additional Expenses Can I Expect?

Beyond the initial purchase expense, there are ongoing monthly costs to consider, including: property taxes, mortgage payments, potential condominium fees, property insurance, and, if desired, professional property management services. Condominium fees often cover most utilities, or these may be handled by tenants, where applicable.

What amount of return can one expect on real estate investment in the GTA?

The potential return on a real estate investment in the Greater Toronto Area (GTA) can vary widely based on several factors, including property type, location, market conditions, financing terms, and investment strategy. Generally, investors aim for two main types of returns:

  • Rental Income Return: This is the income generated from renting out the property to tenants. The rental yield is calculated as the annual rental income divided by the property's purchase price. In the GTA, rental yields can typically range from 4% to 6%, depending on factors like property type (condo, single-family home), neighborhood, and market demand.
  • Capital Appreciation Return: This refers to the increase in property value over time. GTA's real estate market has historically experienced strong appreciation due to high demand and limited supply. However, the rate of appreciation can vary from year to year and even within different neighborhoods. It's important to note that past performance is not indicative of future results. FYI, GTA housing prices as per TRREB have increased by 115% from 2013 ($522,951) and the average price to Jul 2023 ($1,118,374).

Additionally, investors should consider other costs and potential risks, such as property management fees, maintenance expenses, property taxes, insurance, and potential vacancy periods.

What taxes will I pay if I plan to sell my residential property in Ontario?

When selling a residential property in Ontario, there are a few taxes and considerations you should be aware of:

  • Capital Gains Tax: If the property has appreciated in value since its purchase, you may be subject to capital gains tax on the profit. In Canada, 50% of capital gains are included in your taxable income, and you will be taxed at your marginal tax rate on this amount.
  • Principal Residence Exemption (PRE): If the property you're selling is your principal residence for every year you owned it, you may be eligible for the PRE. This exemption allows you to avoid paying capital gains tax on the appreciation during the time you lived on the property.
  • HST (Harmonized Sales Tax): Generally, the sale of a residential property is exempt from HST. However, if the property was used for business purposes, was a new building, or underwent substantial renovations, HST may apply to certain aspects of the sale.
  • Real Estate Brokerage Fees: When you sell a property, you will likely engage a real estate agent to assist with the transaction. Real estate agent fees are typically a percentage of the sale price and are paid by the seller.
  • Legal Fees: You will also need to engage a real estate lawyer to handle the legal aspects of the sale. Legal fees associated with the property sale are the responsibility of the seller. It is important to consult with a tax professional or financial advisor to understand the specific tax implications of selling your residential property in Ontario based on your individual circumstances. Tax laws and regulations can change, and a professional can provide you with accurate and up-to-date information tailored to your situation.

What taxes are levied on rental income in Ontario?

In Ontario, rental income is subject to various taxes and reporting requirements. Here are the main taxes and considerations related to rental income:

  • Income Tax: Rental income is considered taxable income, and you are required to report it on your annual income tax return. The rental income is added to your total income, and you will be taxed at your marginal tax rate based on your overall income level.
  • Municipal Property Taxes: As the property owner, you are responsible for paying property taxes to the municipality where the rental property is located. These taxes contribute to local services and infrastructure.
  • Property Insurance: While not a tax per se, property insurance is an essential expense for landlords to protect their investment. It covers damage to the property and provides liability coverage.
  • Non-Resident Withholding Tax: If you are a non-resident of Canada and earn rental income from Canadian properties, the Canada Revenue Agency (CRA) may require the tenant or property manager to withhold a portion of the rent for tax purposes. It is crucial to keep thorough records of your rental income and expenses to accurately report your rental income on your tax return. Tax laws and regulations can be complex, and it is recommended to consult with a tax professional or financial advisor to ensure you are fulfilling your tax obligations correctly and optimizing your tax situation.

How is the rental market in the Greater Toronto Area?

The GTA rental market has historically experienced high demand due to factors such as population growth, immigration, and a robust job market. Toronto's status as a major economic and cultural hub attracts renters from various backgrounds. Rental rates in the GTA have seen steady increases over the years, driven by strong demand and limited supply.

The rental vacancy rate has historically been relatively low in the GTA, which can contribute to competitive conditions for renters. Condominiums have become a significant part of the GTA rental market, offering renters a range of options in terms of size, location, and amenities. Many investors have purchased condos for the purpose of renting them out.

What is the future of the Greater Toronto Area housing market?

The Greater Toronto Area (GTA) has been grappling with a persistent housing shortage for several years, driven by a combination of factors that have led to imbalances between housing supply and demand. This shortage has had significant implications for housing affordability, rental rates, and overall market dynamics. Here are some of the key aspects of GTA's housing shortage: 

  • Population Growth: The GTA has experienced robust population growth due to factors such as immigration, natural population increase, and the region's economic opportunities. This population influx has increased the demand for housing.
  • Limited Land Availability: The availability of developable land within the GTA's urban boundaries is limited, making it challenging to keep up with the pace of population growth through new construction. 
  • Zoning and Regulations: Zoning regulations, land use policies, and development approval processes can slow down or restrict the construction of new housing units, contributing to the housing shortage. 
  • High Construction Costs: Rising construction costs, including materials, labor, and regulatory fees, can deter developers from building new housing units, especially affordable ones.
  • Demand Outpacing Supply: The demand for housing, both for ownership and rental, has consistently outpaced the supply of new units entering the market, leading to increased competition and higher prices.
  • Speculation and Investment: Real estate investment, including speculative activities, has contributed to housing demand, often leading to properties being purchased as investments rather than for primary residency.
  • Lack of Affordable Housing: The shortage of affordable housing options has led to challenges for individuals and families with lower incomes, impacting overall housing affordability.
  • Rental Market Pressure: The housing shortage has also affected the rental market, leading to low vacancy rates, rising rents, and affordability concerns.
  • Condo Dominance: While the condo market has seen significant growth, there has been a relative shortage of other housing types, such as single-family homes and townhouses.

What is the impact of housing shortages?

  • Affordability Challenges: The housing shortage has contributed to escalating home prices, making it difficult for many residents, especially first-time buyers, to afford homes.
  • Rental Affordability: Rising demand and limited supply have led to increased rental costs, creating affordability challenges for renters.
  • Supply-Demand Imbalance: The imbalance between supply and demand has created a competitive market environment, making it challenging for potential buyers to find suitable properties.
  • Urban Sprawl: Some residents may seek more affordable housing options outside the GTA, leading to urban sprawl and longer commutes.
  • Policy Focus: The housing shortage has prompted policy discussions and initiatives aimed at increasing housing supply, promoting affordable housing development, and addressing zoning and regulatory barriers.

Efforts are ongoing to address the housing shortage through measures such as intensification, increasing housing density, improving zoning regulations, and incentivizing affordable housing development. However, the GTA's housing shortage remains a complex issue with multiple interrelated factors that require careful planning and long-term solutions.

What risks are involved when investing in real estate?

Ontario's rental laws have drawn criticism for favoring tenants, leading to imbalances with landlord rights. These laws, while designed to protect tenants, can hinder landlord's ability to address issues like non-payment or property damage. Rent control measures, meant to curb excessive rent increases, may discourage landlords from investing in property improvements. The eviction process, perceived as tenant-friendly, is lengthy and intricate, making it challenging for landlords to regain property possession even for legitimate reasons.

Compounding the problem, the Landlord and Tenant Board (LTB) faces inefficiencies and backlogs, delaying dispute resolution. Some tenants exploit this situation, utilizing legal processes to delay eviction or avoid rent payments. Property damage and maintenance concerns by tenants further exacerbate issues.

Balancing tenant protection with landlords' rights is essential. Reforms to create a more equitable framework and streamlining the LTB for efficient dispute resolution are needed. Achieving a harmonious equilibrium is crucial for fostering a healthy rental market in Ontario, benefiting both parties involved.

Do you provide Landlord services if we buy an investment property with Team Kalia?

Yes. Team Kalia specializes in helping landlords find sound investment condos followed by qualified tenants in Mississauga and surrounding areas. Finding good tenants requires a lot of time, effort, knowledge and experience. We can help reduce your dilemma and weed out bad lemons.

What steps are involved in the tenant selection process?

Tenant Screening Process: Ensuring Reliable Rentals

Thorough tenant screening involves a series of meticulous steps aimed at identifying trustworthy occupants. These crucial steps encompass: 

  • Rental Application Evaluation
  • Credit Check 
  • Income Verification 
  • Referrals and Recommendations 
  • Supporting Documentation
  • Guarantor Option 
  • Tenant Interview

By meticulously adhering to these tenant selection steps, we minimize potential risks associated with renting our landlord's investment properties.

Do you help with Property Management and are there any costs involved?

Drawing upon our extensive real estate experience, encompassing buying, selling and renting properties for individual landlords, we understand that a full-time rental property management firm can occasionally deplete an investor's financial resources. Furthermore, property owners who choose to oversee their own rental property management are likely to concur that this task can become quite formidable, especially for those residing outside of the area or abroad. From the standpoint of a savvy investor, the decision to engage a full-time property management company may not always align with prudent financial sense.

To help enhance the value of your real estate ventures, Team Kalia introduced an à la carte rental property management program in 2010. This distinctive offering extends peace of mind to our investors (buyer clients), leading to substantial cost savings in rental property management and concurrently bolstering their confidence in real estate investment.

This program is exclusively available through Team Kalia to investors who acquire their investment properties from us. Notably, this program's availability carries no obligations for other sales professionals at RE/MAX Real Estate Centre Inc. Brokerage. This service facilitates direct connections between our landlords and reputed service providers (handymen, electricians, painters, plumbers, HVAC contractors, flooring specialists, kitchen contractors, etc.) at no cost. Our clients have effectively managed their investments from as far as the Middle East, India, and Australia using our services. Moreover, there are no charges incurred for tenant move-in and move-out inspections when utilizing our real estate buying and rental services in Mississauga and the neighboring cities.