Detached home investments prove lucrative

by Neil Sharma on 21 Jun 2021

Condominiums are real estate investors’ preferred asset class, but the laws of supply and demand dictate that higher returns on investment await in the single-family detached market.

“We have a growing population in Toronto, and as far as demand for detached homes goes, it’s going to continue rising, as will demand for detached modern and contemporary homes,” said Jason Ferreira, CEO of ONE Development, a new firm that buys detached houses to gut and rebuild them into modish abodes. “From an investment perspective, our forecasts, market research and consultations indicate that robust demand for detached homes likely isn’t going away. If anything, demand will continue increasing.”

ONE Development is a builder but it also secures investor funds to help pay for the fix-and-flip properties it purchases, and as a result they receive preferred or common shares. The company finds project sites in parts of the GTA like Etobicoke and East York that are replete with wartime bungalows built on opportune lots that, while narrow, are deep and allow square footage to be maximized.

“Our model and style is modern, contemporary and with very clean lines, open spaces and a minimalist feel,” said Ferreira. “Most modern homes have a connection with the outdoors, so we’re always using and maximizing natural lighting through floor-to-ceiling windows and skylights, especially in areas of the house that are dark, like a stairwell. Any time you walk into a main area, you see natural light from any point in the home. What we try to create are bright, wide-open spaces.”

The houses sell, on average, for $2.2 million—the median selling price of a detached home in the GTA was $1,415,698 last month, according to the Toronto Regional Real Estate Board—but Ferreira says that while the price may sound exorbitant, there’s a scarcity of detached homes for sale in the GTA, to say nothing of how few tony houses are for sale at any given time.

“There’s already a supply shortage for detached homes, and an even greater supply shortage for rebuilt modern and contemporary homes. Inventory is so limited that you couldn’t build enough homes to satisfy demand.”

ONE Development, although nascent, intends to rebuild and sell 20-30 homes over the next five to seven years, and the trick, says Ferreira, is to know where to find the lots.

Because so few of these houses are listed on the market at the same time, a compelling case can be made for investors to set their sights on the detached home market.

“Every few months, we’ll buy one, tear it down for rebuild at which time we’ll also be securing the next property,” he said. “There are many pockets on the border of Toronto and Etobicoke with huge concentrations of the types of homes that are perfect for this kind of redevelopment.”

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