Investment Property Wisdom

The Top 10 Hallmarks of a Profitable Investment Property

Posted on September 9, 2020 by pmtadmin

Although some people get into real estate investments for the love of the game, most people purchase real estate properties because they want to make money.

When done right, real estate is a rewarding investment property. It turns over a sizeable profit of passive income, allowing you to diversify your portfolio, develop equity, and grow wealth.

The possibilities are exciting but also daunting, especially if you’re a first-time investor. Real estate can be a tough nut to crack if you aren’t familiar with how the markets work. Your inexperience can lead you to overlook red flags that warn against a property that ends up costing you money.

Before you waste money on a property that doesn’t yield returns, get in touch with the team at Property Management Toronto. Our knowledge of the Toronto housing, condo, and rental markets helps us spot a money pit.  

Better yet, we know which signs point to properties that will generate a reliable and profitable investment for years to come.

Here are the top 10 features we look for in a property for our landlords.

1. The Condition of Your Property

Does a property have good bones? Has it been renovated recently? Is it ready to move in? Are there warning signs about structural problems? Will it need some renovations?

We’re able to answer these questions by performing a thorough assessment and inspection of any real estate property. This crucial step helps us find something that meets your expectations and price points before you submit an offer.

2. Low Vacancy Rates

For individual condo buildings, the vacancy rate is the percentage of units that remain unoccupied. But it can also describe the percentage of properties sitting vacant in an entire neighbourhood or city.

A low vacancy rate works in your favour, as it indicates there are more renters than there are available properties. When demand outstrips supply like this, you can see a bump in your prices.

3. Higher Rent Prices

The average rental price in an area is a good metric to check at the start of your search, as it helps you determine if your rental income will turn over a profit once you account for mortgage payments, taxes, and other expenses.

In Toronto, the average rent is $2,261 according to Rentals.ca’s National Rent Report; however, this may fluctuate across the many neighbourhoods that make up this great city.

As Toronto’s top real estate investment experts, we help you compare these stats to pinpoint the best area to invest your capital.

4. Low Property Taxes

For a city its size, Toronto has relatively low property taxes. In fact, it has some of the lowest taxes in the province, with the average homeowner paying just $3,906 each year.

Of course, how much you end up spending in taxes depends on your property’s value, so you may be paying more than that. And, with Mayor John Tory’s plans to raise these taxes by eight percent by 2025, it’s likely your bill will see a hike regardless of your property’s market value.

Current and future property taxes is something we consider when calculating your cash flow.

5. A Safe Neighbourhood

Toronto is home to many welcoming and secure communities. But like any city, it has pockets where crime may be more prevalent than others.

Be cautious of investing in these areas, as vandalism, burglaries, and other crimes may eat into your bottom line. You stand a higher chance of having to repair your property if you become a target of these criminals. Higher crime rates may also scare off potential A+ tenants.

6. Number of Schools

What kind of tenant are looking for? If you’re planning on targeting young families, you need to keep the number of schools near your property in mind. Tenants with children want to feel confident in the schools they send their kids, so they’ll search out properties close to highly quality schools.

The number of grade schools in your area is a good indicator of future earnings, regardless of whether you want to rent to families. Areas populated by schools with good reputations tend to reflect well on the values of nearby properties.

7. Nearby Amenities

One day, your rental property investment will become a place where people live. Tenants will thrive when they’re closets to these essential facilities and services:

  • Hospitals, medical practices, and healthcare centres
  • Shopping malls, storefronts, and other retail opportunities
  • Restaurants
  • Libraries
  • Parks, gyms, swimming pools, and athletic centres

Due to the layout of the city, almost every neighbourhood has these amenities in spades. But it’s a good reminder of the broader features of a property investment. Beyond the bones of the building, you’ll want to look to the neighbourhood to see what will draw people to this area.

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8. Proximity to Transportation Routes

Being able to write “steps to the subway” in an ad is a coveted piece of real estate marketing. People want to be close to major routes through the city without needing to catch several connecting buses first, and they’re willing to pay for it.

One study shows condos within walking distance of the subway were 14 percent more expensive. Meanwhile, single-family homes were 15 percent more expensive.

9. Future Development Plans

In Toronto, there’s always a development project underway, which is a good indicator of the economy and the market. However, future plans could affect your property’s value for better or for worse.

It depends on what’s going in. While new housing or condos may increase your competition and lower your returns, business developments and schools may drive up rental prices.

10. Neighbourhood Demographics

Toronto is known as a city of neighbourhoods — 140 official ones to be exact. Unofficially, there may be more than 240 neighbourhoods subdividing the city into unique communities. Each one has a different character and attraction, which helps you understand the kinds of renters you can expect to lure.

The Annex, for example, is a popular neighbourhood for students of the University of Toronto. Buying here will likely increase your chances of renting a student, which may mean you face summertime vacancies on a regular basis.

Understanding the city’s neighbourhoods helps Toronto property management companies like us help find the best possible real estate for your needs and expectations.

Our thorough tenant selection plan is an additional step we take to ensure we find the right fit for your property. We take a comprehensive look at tenant candidates to find only A+ renters.

Tenant screening joins our tenant management as part of the broader services we provide our landlords. To learn more about how we can help in other ways, check out this post answering the question what do property management companies do for landlords.

There Are a Lot of Puzzle Pieces

There’s no single sign that an apartment, condo, or home will rake in a healthy cash flow, but several. With so many things to keep track of, investing can seem like an overwhelming and difficult decision.

But anything is possible with the best property management company Toronto has to offer on your side. Our experienced team of real estate experts can eliminate stress to make the experience what it should be: exciting! We believe growing your real estate portfolio, or buying your first property, should be a thrilling experience, so that’s why we do what we do. If you’re ready to find success without the stress, get in touch with us today!