Condo investment in Toronto tenders diminishing returns, but the discerning real estate investor can still turn a tidy profit.
Two-plus-twos— that is, two bedrooms and two bathrooms—are among the scarcest commodity in downtown Toronto real estate today. In a city wherein glass towers are sprouting faster than weeds, units are shrinking in size.
According to Manu Singh, a veteran investor and broker with Right At Home Realty, close to 70% of units in new builds are smaller than two-plus-twos, ergo, they teem with value.
“For an investor, the more scarce a product or service, the more valuable it will be down the road,” Singh told CREW. “That applies to everything, but when it comes to real estate you definitely want to be on the scarcity side, in terms of the unit you purchase.
“There’s more value to a two-plus-two, or even three-bedroom unit, because when they flip it for a profit they’ll have less competition and less supply that can dilute the sales price because buyers won’t have as much choice.”
Not only is there a dearth of two-plus-twos in downtown Toronto, they appeal to a wider cohort of buyers. Downsizers prefer the two-plus-two because, while significantly smaller than the house they sold, it’s still large enough to host their visiting children, who will have their own bedroom and bathroom.
Young professionals, too, flock to two-plus-twos, and are willing to pay premiums.
“You have extra room for a nursery and extra washroom for guests,” said Singh, adding that young professionals who cannot afford Toronto’s exorbitant rents or to buy a place of their own are also ideal candidates to rent a two-plus-two.
“Roommates are popular in the downtown core for urban professionals. You can increase the rent because you can split it among two income-earners.”
Toronto’s condo units are getting smaller by the build, so Singh recommends anything over 1,000 square feet.
“From an investor point of view, you want to focus on getting a larger two-plus-two in terms of square footage,” he said. “If you can get greater than 1,000 square feet, it’s a great investment because, again, newer developments are becoming smaller and smaller for the specs. In general, two-plus-twos rent higher and they sell better for those reasons. It’s great for investors.”
According to Sunny Sharma, president and co-owner of Century 21 Leading Edge VIP Realty Inc., the bedroom and bathroom combination is usually split so that each resident can have a semblance of privacy.
Alternatively, in student areas one-bedroom-plus dens equipped with two bathrooms are popular are commonly rented to university and college students.
But during preconstruction, two-plus-twos offer the best bang for your buck when it comes to square footage.
“The two-plus-two per square foot might be a little cheaper during preconstruction than one-bedroom-plus-dens and two-bedrooms because the demand isn’t as high,” said Sharma.
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Landlords in crosshairs
When you flip houses, you are not usually intending to live in the house; rather the strategy is to sell the property as fast as you can so as to avoid paying taxes and other expenses on the property. While there will obviously be initial costs that you will need to budget for, house flipping can be done with few resources and little experience.
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If you’re a newer house flipper, you have probably heard about the 70 percent rule. Here’s your guide to the investing rule that can prevent you from spending too much money on an investment.
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