April 2011 Home Of The Month – Bloor Dufferin –


When it comes to owning real estate, your first purchase should always be a primary residence.

Governmentally driven ownership programs make it a sensible first step. Among these programs are the tax-free withdrawal of cash from RRSP’s (Registered Retirement Savings Plans), which is essentially a self-directed loan for use towards a down payment on your first home, the ability to put as little as five percent down on your first purchase through the CMHC (Canada Mortgage and Housing Corporation) program, and the capital-gains tax exemption on the sale of your principal residence.

These government initiatives not only help Canadians satisfy the fundamental need for shelter, they provide opportunity to profit from the housing market. In particular over the past decade, they have proven to be essential in building financial security.

How to capitalize? One way to increase your financial net worth is to build a portfolio that includes an investment property. Owning a property where the rents pay off a mortgage is a great way to secure your financial future. Depending on the amount of capital you have, plus the time and energy you’re willing to invest, there are a few options available.


Consider purchasing a recreational property. This is well-suited to those who desire a secondary property they can use themselves during the year, while generating an income to offset the debt and operating expenses. This type of purchase best serves those who don’t mind the management associated with doing short term furnished rentals (mostly seasonal), as well as the upkeep required to keep the property and its’ contents in good condition. While this is not definitively a money-maker, in particular because recreational properties do not increase in value at the same pace as other properties, it is a proven way to build equity through a rental income combined with enjoying the benefits of respite in nature. Who doesn’t dream of owning an escape from the city?

Or, you could contemplate purchasing a condominium. The main benefit of condominium ownership is its’ ease of operation. Being one of several units, most condominiums have a property manager and board of directors who, as part of your monthly common fee, ensure the building is kept in good operation and repair.

As a result, the investment of your own time is minimal; you are responsible for finding a reliable tenant and attending to basic interior maintenance associated with the wear and tear of everyday living.

This is an easy way for investors to build their portfolios. If you buy following the location, location, location mantra of real estate and ensure that the property is located in an in-demand, easy-to-rent location, you should be able to place a tenant fairly easily. However, there are some challenges and risks associated with a condominium purchase. Your building could be poorly constructed or mismanaged, resulting in special assessment levies or a substantial increase in the monthly common fee -many of you may heard about the horrors of ‘leaky condos’ that decimated the financial security of many homeowners on the West Coast.

Also, if you are purchasing in a large complex, in an area that has several hundred condominiums, or in a location dominated by investors (like Toronto’s CityPlace shown in the photograph below), then both the rental income and the market value of your condominium can be influenced by supply and demand. Don’t forget, if you are one of several hundred similar units in size, location and style, the first unit to rent or sell will be the one that is the most aggressively priced.

As a result, the opportunity to profit can be impacted by the micro-market of your building, such that values will be based on the most motivated of owners. Also, the acquisition price today is substantial relative to the return on your condominium investment. In urban centres like Toronto and Vancouver, an entry level price of $300,000 will garner a studio or one bedroom suite that will generate a nominal rent of around $1200-$1300 per month. Once you deduct your common fee and property taxes (about $500 per month in Toronto), you’re generating less than 3% return on your investment. Not so lucrative eh? There are other investment vehicles that generate that kind of return with less risk and hassle-like a GIC (Guaranteed Investment Certificate), for example.


A third option is the purchase of a two or three unit freehold income property in good repair and solid condition. Generally not requiring as much maintenance as managing a seasonal rental, ownership of this type of property carries with it far more responsibilities than purchasing a condominium.

Having more than one unit means having more tenants to manage. Wear and tear increases, and you need to be able to handle some of the operational maintenance associated with a freehold property like snow removal, garden maintenance and garbage pick-up. Depending on the level of retrofit and construction of the dwelling, you may have one thermostat controlling the central heating and cooling systems, one wiring panel serving the entire property and/or the property may not meet fire code.

While I encourage owners to do a utility split where each tenant pays a proportional share of the expenses relative to the size of the unit, this can be problematic should one tenant not pay their portion in a timely manner. Landlords should make a serious effort to ensure each unit is equipped with smoke/co2 alarms and fire extinguishers. I also advise owners to rent units a bit under market value to reduce turnover and vacancy, in particular if there is a basement suite which typically has the highest rate of vacancy.

By reducing the rent to a tenant in return for household responsibilities like snow removal, garbage bin pick up and retrieval, yard maintenance and cleaning of common areas, one can potentially ease the hassles associated with this form of investment.

Case in point is April’s Home Of The Month.



I recently had an investor client snap up this downtown semi-detached house with two car concrete block garage listed at $455,000 within a day of coming to market. Substantially renovated, with an addition on the back, this turn-key single family residence easily converted into a two bedroom main and lower level unit with laundry and, with its’ roughed-in kitchen, a ready-to-convert two bedroom upper unit.

My conservative estimate of income is $2400 per month plus utilities; when you break out property taxes, water/sewage/garbage charges, and building insurance, it will generate a 5% annual return on investment. Not bad!


I should note that the investor in question is purchasing as a long-term hold, and has no intention of selling for the next 20 + years. This had bearing on my recommendation to purchase this house. Why? This property is located on a busy arterial road in the downtown core, which was one mitigating contributing to its’ reasonable $455,000 price tag. Located across the street from the Galleria shopping centre, on a bus route, a four minute walk to the Dufferin subway stop on the Bloor line, and a short stroll to shops, library and Dufferin Grove Park, this stellar house will always be valued less than similar houses located on exclusively residential streets that tend to be quieter.

In fact, it was about $100,000 cheaper than if it was located just one or two blocks east, as it would have had far more appeal to users rather than investors. However, the rent this property will generate is similar to properties located on quieter streets.

Simply, it is close to all the amenities a tenant without a car requires, including the added bonus of being able to look out the window during winter for an approaching bus instead of standing at the bus stop shivering. It will rent faster due to the visibility of signage out front, making it appealing to this investor.

However, because it is on a busy road, this property may not increase in value at the same rate as it might on a quieter street. So if the intention was to resell in five to ten years, it may have made sense to leverage his mortgage debt to acquire something with broader market appeal. Given that is not his mandate, this is a good example of an intelligent strategy to build long term financial stability.

This property was a great buy! If you’re interested in purchasing an investment property in the City Of Toronto, or know someone who is, please know this is one of my fortes. With a multi-disciplinary education in housing, over twenty years of real estate sales, marketing and development including a sterling reputation as one of Bosley Real Estate’s Top Producers, I make it my mandate to guide buyers and sellers through all their real estate needs.

~ Steven

Buy Of The Month
Real Estate

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