The prohibitive cost of single-family homeownership in major Canadian cities like Toronto has effectively rendered it the new ‘Canadian dream,’ and though its attainment is cumbersome, it is realistic.
If you have the right plan, that is.
Alex J. Wilson, broker-owner of RE/MAX Wealth Builders Real Estate in Toronto, turned a modest $25,000 down payment on a condo 10 years ago into two houses that are worth $5.5 million today. By simply tapping into his RRSP, Wilson secured his first home in a high-rise, where he lived for four years.
However, his next purchase, a triplex, was the lynchpin of his 10-year plan.
“I was able to use the rental funds to help offset the carrying costs of the property, and I do think that’s what everyone should do. It’s an incredibly well-proven investment that can really help younger couples or young individuals get a foot in the real estate market and buy freehold properties,” Wilson said.
“My wife and I lived in every unit of the triplex, from the basement unit when she was pregnant with our first child, to the main unit when we had two children, and then the second and third floors with three children.”
The young family lived in the triplex for six years before deciding to buy their first single-family home—a process simplified by their positive cash-flowing investment property nullifying the need to use any additional funds of their own. In fact, Wilson noted that rental income generated by multiplexes can be allocated towards mortgage qualification, thereby stretching an applicant’s budget and helping them pass the B-20 mortgage stress test, which requires borrowers to prove they can maintain their loan at either 2% above the contract rate or the minimum qualifying rate of 5.25%—whichever is higher.
However, it is crucial that borrowers first acknowledge that, in a hyper-competitive real estate market like the GTA’s, very few people have the means to buy their dream house right away.
And that’s okay, Wilson says, which he explains in this short video.
“The video walks step-by-step in five minutes how I did that, and how anyone can do that. It’s realizing that at 33 or 35 years old, if not younger, you don’t need your dream house,” he said. “You just need a roof over your head, and one that makes the most economical sense, and if you realize that, you can have your dream house in 10 years.”
Toronto is replete with condominium owners who are stuck on the property ladder, occluded from climbing any higher by exorbitant price points and paltry supply relative to scorching demand. However, as Wilson expounds, climbing the ladder is certainly possible, and fortunately, there’s ample multiplex inventory in the city.
Wilson is bullish on the area surrounding Dundas West Station, in particular, the 2-km radius eastward and north into the Junction, because there are seemingly countless multiplexes, and considering that Toronto’s rental demand is arguably higher than it’s ever been, there will be no shortage of triple-A tenants. In addition to below-grade transit, commuters at Dundas West Station can access Toronto Pearson International Airport and Union Station via the Union Pearson Express, hop on a streetcar or a GO Train, making it the second-largest transit node in the city, which is sure to amplify demand for nearby rentals and help landlords command rents that, in some cases, could rival those in downtown Toronto.
“You can command higher rents, not just today but into the future. Look at what’s happening in 10 years or 20 years. You never sell these freehold assets, and you help contribute to the liveability of the city because you’re providing precious rentals and you’re getting high-quality tenants,” Wilson said. “Also, the pool of buyers on these properties is limited, so you can take advantage of that.”
Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.
