If you’re looking into the Toronto real estate market, know that this is one of the most competitive and most expensive real estate markets in North America. In the last few years, Toronto’s median house prices have drastically increased, and the supply of houses falls short of meeting the demand. Homes for sale in Toronto sell for over one million dollars on average, and even condos regularly approach $700,000. We’re not trying to scare you away from buying a house in Toronto, but it is vital that you have a realistic expectation of the market before making a $200,000 investment in a property.
1. Manage your Expectations
New homebuyers coming to Toronto with money in their pocket should not expect an easy, seamless homebuying experience. These million dollar homes require a $200,000 down payment most of the time, and unless you’re ready to handle that, having the big yard and the big house might just be out of reach.
If you’re looking to buy a condo or home in Toronto, you should have an annual income between $120,000 and $200,000 dollars. Making more is better, but making anything less you should focus instead on renting. Houses are appreciating quickly currently, and as a new homebuyer you might feel pressured to jump on the train now before it’s too late. Don’t do this. Unless you’re ready to shoulder that kind of investment it’s not worth taking that kind of responsibility on right now. Rent for a few more years and keep saving your money, and get into the market when you’re ready to do so comfortably.
You can, of course, find big yards and those big houses for less, but they won’t be in Toronto. Exceptions are always out there, but as a good rule of thumb you have to head outside of the Toronto area for a detached home that will sell for anything less than one million dollars.
2. An Overview of Toronto
Take a birds eye view of the city and you’ll see that it’s roughly rectangular. Right in the center of that rectangle, from the University of Toronto to the waterfront, that is downtown. Here you’ll find most of your condos, although pretty much every major street in Toronto will have some condos rising up alongside it. The city gets rough east of downtown until you get to the fringes where there are many nice neighborhoods. To the west of downtown you’ll find trendy blocks beloved by young professionals, with great nightlife and high rise condos.
The city is less dense in the northern section of the rectangle. Once you get north of Dupont street the neighborhoods become more dispersed, with more parkland to be enjoyed. After crossing Highway 401 (the four-oh-one in Toronto-nese) you’re thoroughly into the suburbs. The city extends west all the way to the Toronto Pearson International Airport, and east to the suburb of Scarborough. The farther east and west you go from the city centre, the more suburban Toronto becomes. Measured end to end, Toronto is roughly 37 kilometres long and 17 kilometres wide.
3. Figure out your Timing
How long do you plan to be in Toronto? Are you here for work for a few years, or are you trying to settle down for the long haul? How you answer this question will affect the kind of properties you should look into. If you’re looking to stay for a short time (less than five years) then you’re better off renting or buying a condo at the very most.
If you’re planning on spending the next few decades in Toronto, buying a house is a better plan. New condos get built in Toronto every year, it’s houses that are in much shorter supply. However, don’t bet on property values appreciating at today’s astronomical rate forever. What might look like a quick investment with a big ROI right now might wind up taking twenty years to pay off rather than eight or ten. Buying a home in Toronto is still a great investment, but don’t get burned thinking that it’s going to be a quick one.
4. Renting Out Part of Your Home is an Option
Plenty of homeowners in Toronto rent out part of their homes or condos for extra income. If you happen to have a basement bedroom, perfect! That is by far one of the most sought after property types in the city. One month’s rent collected from this bedroom can be used to cover your home’s mortgage. However, Canada considers money collected from rent as income, so be prepared to be taxed on that. It gets more complicated from there on out, so we advise that if you’re looking seriously into renting your property, you should get in touch with an accountant.
5. More on Taxes!
Toronto does have low property taxes, so you do get a break from that, but expect a pretty hefty property transfer tax. You get taxed by Ontario and Toronto. For a million dollar property, expect a $30,000 property transfer tax. Again, we’re not trying to scare you away from Toronto, but you need to know this going in.
6. Know your area!
Before closing on a home for sale in Toronto, you should check out the area you’d be moving into in person. This can be hard if you’re currently living far from the city, but we promise it’s worth the time if you can spare it. Take a walk through the streets of the area you’re interested in.
Test out the neighborhood first during the day, then at night. If you’re not comfortable with the feel of the place, think again about buying that house. Toronto is a very diverse city with tons of different neighborhoods to choose from, and we promise that if you don’t like one, you’ll like another. Take your time and don’t sacrifice your peace of mind if you don’t have to.