By: Michael Wacholtz

The Investment Rental Market - Are You Missing an Opportunity?

Tags: Homes in Toronto, invest, house prices, rent, executive rental, property

Here’s the scoop. Real estate statistics are hyper local. I’ve mentioned it before, and I’ll say it again, what is happening GTA wide does NOT necessarily reflect what is happening around YOUR HOME in YOUR NEIGHBOURHOOD. What we hear on the TV are overall, broad-based numbers that often are skewed by the media in such a way as to grab your ears or eyeballs. And that’s fine. If you’ve watched any of my videos that I’ve been doing online over the past month, you’ll see that I’m doing much the same thing with special effects to grab your attention right at the beginning. Nothing like a piano dropping from the sky to make someone stop scrolling on Facebook. It’s about the eyeballs people! 
All the above being said about broad numbers though, I’m actually going to use some stats that are a bit more broad-based to highlight what I’m seeing as a possible opportunity: the investment rental market.  Look at these numbers:

Year Average Rent % Change/Increase
2010 $1419.00  
2011 $1490.00 5%
2012 $1541.00 3.4%
2013 $1557.00 1%
2014 $1571.00 0.8%
2015 $1596.00 1.6%
2016 $1698.00 6.3%

These are taken from the Toronto Real Estate Board’s historical stats page for Q3 (we don’t have Q4 yet as we’re still in it). As you’ll see, 2013 and 2014 were fairly flat for rental increases, but heading into 2015 they double, and almost quadruple from 2015 to 2016. That’s significant, and I think it’s a direct reflection on what landlords feel they can ask for their properties due to the cost of housing in Toronto. The barrier to entry has become too high for some people, so even though they have money and want a house, they are staying in the rental market.
The opportunity I see is that these, let’s call them “Blocked Barrier Buyers,” they have aspirational tastes, so they will pay more for what they deem a great place. So executive rentals and luxury rentals will be in increased demand, and these triple B renters will stay in them longer, because the higher rents that these properties command will prevent them from moving into housing of their own (they won’t be able to save enough for the down payment). It’s in these numbers that I really and truly see the “Manhattan-ization” of Toronto, and a serious win for the owners of these executive rentals.  
So yes, we look at current cap rates on investment properties and don’t get that excited over what seems like a relatively anemic return, but if you take the longer view, and buy a stellar property, or buy and renovate a property into an executive rental, I think that it can quite quickly become a solid plank in your investment and retirement portfolio. I’ve already got several clients interested in looking at this model of wealth-building, maybe you want to be added into the mix for opportunities that I find? It’s always worth a chat over a beverage of your choice. Give me a call at 647-284-3118 and we’ll set it up.