Where to invest in dt toronto?

Discussion in 'Real Estate General Discussions' started by Chris_Hull, Apr 26, 2012.

  1. Chris_Hull

    Chris_Hull Active Member

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    I have some savings and wanna make a condo investment in dt toronto. I can either use my money to invest in a 1+1 unit at yonge and bloor area (or may be other similar dt core area such as bay and collge etc.), or I can buy a 2+1 unit at medium level dt areas such as city place or king west. The price for both type of units with parking and locker is around $500,000. I know in term of location, dt core is better. However, when thinking of rental income, a 2+1 suite at city place can be rented out from $2,500 to $3,000 per month, but a 1+1 suite at yonge and bloor is usually rented out at $1,800 to $2,200 nowadays. The above rental income datas are based upon my experience or my friends' experience.

    So folks, can you guys give me some suggestions on where I should make potential investment in dt toronto area? Many thanks~~
     
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  2. kkgg7

    kkgg7 Banned

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    Toronto's rent return sucks like hell.
    In Chicago or the Bay area, one bedroom condos which charge $1500/$1600 rent per month are sold in the low $200K. Here a similar property sells for 60% more.
     
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  3. urbandreamer

    urbandreamer recession proof

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    You could make more buying a TH near Jane & Finch and renting it out to students.
     
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  4. Chris_Hull

    Chris_Hull Active Member

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    I'm not only considerring rental income here since long run asset appreciation is another important factor to think of. My question is if consider rental income and asset appreciation together, where is the better choice?
     
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  5. Chris_Hull

    Chris_Hull Active Member

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    The US market is low now, but is it complex for Canadians to invest in US market in terms of mortgage borrowing and taxation?
     
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  6. Chris_Hull

    Chris_Hull Active Member

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    btw, what's the price for th there and what's the monthly rental income?
     
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  7. ISYM

    ISYM New Member

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    TO is in its 17th year of straight gains, it cannot last. How long is long term for you 3,5 7, 10 years? The last downturn took 7 to start to recapture lost value.

    I'm suggesting you not do this just because of your friends' experience and certainly not at Yonge and Bloor (east anyway) either, the area is over stocked with resales. Consider this in TO anywhere: you'll buy a pre-con at a low interest rate and luckily, rent for let's say a remarkable 10% cap rate. Three years from now when the building is turned over, your reserves will have to be built up by an additional 17 & 20%, maybe more of whatever the maintenance fees were when you bought, add another 2 - 7% at least once every two years for rental fees/losses and X% on a mortgage increase if the markets go south. The longer you hold onto the condo, the higher the risk that you'll be facing an increase in costs for wear and tear on structure, modernity and amenities. In 5 years during a downturn your building is already déclassé - in today's TO it was déclassé the day after it broke ground.

    If you must, I humbly suggest that you invest in multi-residential freehold where the units are more than 500sf.

     
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  8. Chris_Hull

    Chris_Hull Active Member

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    Thank you for your input! The maintenance fee for condos is not that horrible I think. For example, the monthly fee of my friend's 2+1 unit at city place is less than $500. The total cost($300,000 mortgage monthly payment, maintenance fee and property tax) for him per month is around $1850, and he rented out his unit at $2700. His monthly gain is $500 mortgage principal and $850 cash which is total $1350. Plus he got over $70,000 capital gains in around 2 years. His investment is around $150,000. When I figure this out I think dt toronto's condo is still a good investment option, isn't it?
     
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  9. Chris_Hull

    Chris_Hull Active Member

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    I think city place could be my potential investment option, but I'm still looking into some better dt areas.
     
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  10. js97

    js97 Senior Member

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    Half a million dollars and you can't even get a 10% on revenue (nevermind profit). how does that work?

    Unless you havea 15+ year horizon, it's a lot of risk for very little return
     
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  11. Ric

    Ric Active Member

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    Chris,

    As mentioned by ISYM, the market has been up for over 15 years, basically anywhere you invested you would have made money. But as Warren Buffet says " It's only when the tide goes out that you find out who has been swimming without shorts". The fact that the market has become very uncertain and prices so high that +ve cash flow is difficult to come by makes the old saying "location, location, location" even more important now. Personally, if I were you I would be looking to invest in pre-con that is on the subway line or maximum 5mins walk. These are the properties that will tend to hold value and are constantly in demand in both good and bad times. Stay away from the suspect areas (City Place, Fort York etc.) that are far from subway and devoid of retail. Also, when you are doing your cash flow analysis, do not base the calculations on today's interest rate. Since your unit may not be ready for 3-5years, add an extra 2 percentage points to your mortgage rate, so you get a more accurate feel for what your expenses will be.

    Another very important point is to make sure you go over your disclosure document with a fine tooth comb (before your 10 day rescission period ends). Things such as gym exercise equipment, heat pumps, guest suites, and even HVAC systems are being leased or sold back to the condo board by the Builder which means higher maintenance fees after the first year. Make sure you have a good team working for you (lawyer, RE agent, accountant,etc.)

    Best of luck.
     
    Last edited: Apr 27, 2012
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  12. Chris_Hull

    Chris_Hull Active Member

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    Thank you for your advice! My confuse is that nowadays pre-cons near subway in dt. core (such as yorkville , yonge and bloor, yonge and wellseley and yonge and college) are so expensive, and therefore to me some units in city place make greater positive cash flow when you consider the cost of the units and rental price in the market. So do you really suggest to sacrifice some positive cash flows for a better location?
     
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  13. Ric

    Ric Active Member

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    Yes, always go for location first. They will hold on to value the most, I'll rather subsidize my rental income by 10% per month (even though I'm yet to purchase a -ve cash flowing property) than lose 10% on the overall value of my unit. But still, if you research and do your homework and not rush in because everyone else is doing it: You may still be able to find pre-con (albeit almost impossible) in a great area that will do both (good appreciation potential and +ve cash flow). You may also want to take a closer look at resales and assignments.

    Also, if you are going pre-con, make sure ur agent is one that can get you in very early (at least Platinum level) for the project you are looking at. Otherwise, you will already be behind the 8 ball of folks who bought at $20-30K cheaper.
     
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  14. CN Tower

    CN Tower Banned

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    kk, rental yields in Toronto are low because there is enormous demand to live, work & play in Toronto. It's a large, growing & safe city. Why is that so tough to comprehend?

    Chicago is a weak market and I believe the area is shrinking and 'The Bay Area' probably includes Oakland so you might as well throw Hamilton in with Toronto.

    I have some clients looking at deals in the better parts of San Fran. Trust me they're no steals either.

    In my opinion the best area to invest in Toronto is Yonge & Eglinton. It's got it all.
     
    Last edited: Apr 27, 2012
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  15. Ric

    Ric Active Member

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    +1

    If the prices for Bazis E-condos are competitive; it could be a good one for long term play.
     
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