Is a rental property a good investment in the GTA?
At current GTA prices most units do not cover their costs from rent, so the case rests on appreciation, which is a bet rather than a yield. Run it with real numbers including vacancy, maintenance and tax on the rent.
Do the arithmetic honestly. Against gross rent, subtract mortgage interest, property tax, insurance, condo fees, maintenance, a vacancy allowance, property management if you will not do it yourself, and income tax on the net rent. Many GTA condos have been cash-flow negative on that basis for years.
That does not make it wrong, but it changes what you are buying. A negative carry funded from your salary in exchange for expected appreciation is a leveraged bet on prices, and it needs to survive a period where prices do not rise.
Things people underweight. Investment properties require twenty percent down minimum and cannot be insured, and they price higher than owner-occupied. Ontario's tenancy law caps rent increases for most units and the tribunal is slow, so a non-paying tenant can take many months to resolve. And the capital gain on a rental is taxable, unlike your principal residence, with recaptured depreciation on top if you claimed it.
If the numbers only work assuming appreciation, say that out loud before you buy.
What it depends on
- purchase price against achievable rent
- your marginal tax rate
- vacancy and maintenance experience
- leverage and rate
Answer it with your own numbers
You will need: purchase price, down payment, rate, expected rent.
Model the carrying costNext questions
How do I know if a basement apartment is legal?
Ask for the building permit and its final inspection, not the tenant's rent receipts. Which rules the unit has to meet depends on when it was created, so the permit file is the only thing that settles it.
Ontario
Do I pay HST when I buy a house?
Not on a resale home. On new construction from a builder you do, though builders normally quote a price that already assigns the new housing rebate, so the tax is inside the price rather than added at closing.
Ontario