As interest rates continue to stay at historical lows and immigration in the GTA remains strong[1], real estate will continue to boom. The way that I see the real estate market now and in the future, first-time homebuyers in the GTA have four options to own real estate and stay in the GTA. These options are as follows:
Buy a Condo
Pros
Typically in desirable location with a good walk score
Continue to live the GTA lifestyle
Maintenance free
Onsite amenities
Cons
Average price north of $600k for the average condo
Few units available in the $400k-$450k price range
Will likely be a touch smaller than current rental accommodations
Buy a Bungalow
Pros
Could potentially finish the basement to be a basement apartment and rent out for additional income. If basement apartment is already in place 50% of rental income can be captured to help with a mortgage approval – seek mortgage brokers advice[2]
Vacancy rates are hovering around 1% in Toronto – It’s a Landlord’s dream!
Own land
More flexibility to renovate to fit your needs and add on to the house in the future
Cons
Average price hovering around 800k for bungalow in Mimico/New Toronto/Long Branch – Similar in other gentrifying neighbourhoods
Many built in the 1930’s and in need of work
Walk score will likely be lower (but still OK) - some lifestyle changes will need to be made
Continue to rent, invest out of town and hire a Property Manager
Pros
Lower entry price point in markets such as Cambridge, Guelph, Hamilton, Ajax, Whitby and Oshawa. In these markets you can find a semi-detached and sometimes detached houses for $400-$500k
None of these markets have high vacancy rates and rent rates continue to climb
Still building equity but maintaining desired lifestyle in the GTA
Cons
Sometimes Property Managers aren’t exactly perfect
Unexpected expenses
Potential tenant issues
Co-ownership agreement with friends to get into the market
Pros
Greater downpayment and buying power
Equity building
Familiarity with co-owner
Cons
Each party could have a lifestyle change that may make the co-ownership agreement less appealing to one or both parties[3]
Managing household responsibilities, repairs and maintenance
Agreeing on renovations and renovation design
All of these could be options to get into the real estate market, contact me today to discuss these options further. I have experience working with first-time home buyers, investing in single-family and multi-family property, renovations and partnership agreements. I would love to help you take the plunge in to home ownership.
Sincerely,
Derek D. Wacker
[1] https://www.cbc.ca/news/canada/toronto/toronto-immigration-1.4383867
[2] https://www.cmhc-schl.gc.ca/en/finance-and-investing/mortgage-loan-insurance/mortgage-loan-insurance-homeownership-programs/rental-income
[3] https://www.advisor.ca/tax/estate-planning/what-to-do-when-friends-want-to-buy-property-together/