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Real Estate Investment in Ontario’s Dynamic Markets

Real Estate Investment in Ontario's Dynamic Markets

Real estate investment is integral to Ontario’s economy. The right strategy, which includes considering economic and geographic factors, is one way to pick good residential and commercial properties. 

One area in Ontario that presents good investment possibilities is Kitchener Waterloo. In April 2024, 692 homes were sold via the Multiple Listing Service® (MLS®) there.

Identifying Profitable Investment Opportunities

Identifying profitable investment opportunities means having the correct information that’s up to date. For example, the Canadian Real Estate Association (CREA) provides sales numbers for the Kitchener Waterloo area for the first quarter of 2024. In that time frame, residential property sales numbered $1,481, up 7.6% from the first quarter in 2023. 

Investors will want to combine data with good strategies like the following:

  • Take a look at the local amenities that make a place a good or bad investment. Those categories should include transportation, shopping, educational, and healthcare facilities. 
  • Finding a good real estate investment also means examining the area’s economic factors. A robust economy will have several diverse factors, such as technology and manufacturing sectors.

Another good strategy is to look at the supply and demand in the particular area you’re interested in. More supply can lower the values, and high demand and limited supply create a more favourable condition for investing.

Investors should also be looking at the possibility of buying properties to rent them for a good ROI on the investment. That includes renting. 

Understanding the Rental Market Landscape in Ontario

The Toronto Regional Real Estate Board (TRREB) has released its Q1 rental market statistics for 2024, and the first takeaway is that condominium apartment lease transactions were up firmly for the first quarter. The number of units listed was also up. When that filters down into the Waterloo region, the Canadian Mortgage and Housing Corporation (CMHC) reports that the average two-bedroom rental in Waterloo was $1,469 per month, up 7.2%. 

Still, the RBC reports that finding a rental in Canada has never been more challenging as vacancy rates fall to a 35-year low. They cite the drop in ownership, affordability, and the significant spike in population growth that has kept pressure on rental demand starting in 2023.

The takeaway here is that policy action that supports supply-side measures and boosts will be critical to balancing the market, given these strong demand-side pressures. What can make the situation even more dire for investors is that 8% of purpose-built rental stock is now in arrears, according to The Special Housing reports from RBC.

Whether an investor is deciding to rent the property out or buy it for other purposes, there are risks that need to be considered and managed. 

Risk Management for Real Estate Investors

Ensuring you’re involved in a profitable investment means learning how to manage the following risks. 

Market Risk 

The market comprises different economic conditions that can include demographic shifts and changes in the interest rate to name just a few. Investors who are buying properties to hold on to them for long-term appreciation can face these kinds of headwinds.

One of the solutions is to do market research. Start at the beginning by gathering the data that matters like average property prices rental rates and vacancy rates. employment statistics and neighborhood development plans can be helpful.

Repair Risk 

Some properties can be expensive to maintain and repair. Investors even need to keep in mind that properties can depreciate over time. Some of the bigger ticket items include foundation and roof repairs.

A thorough inspection can make a big difference. A home inspector or an appraiser can look at electrical faults, plumbing issues and even structural problems. Regular maintenance on an existing building can be regular checks on HVAC systems and the roof to lower the risk of repairs.

One of the best proactive ways to reduce the risk of investment is to select good tenants. Finding people who report maintenance issues and follow the lease agreements reduces any issues. 

Investor Success Stories from Across Ontario

Mortgage Broker Store has several success stories from Ontario. Here’s how the company made some money on a property in Waterloo.

Bill Smith ( not his real name)  contacted them looking for a mortgage because he faced a possible eviction. Back in  2019, housing prices were predictable and stable. We suggested he get a computer-generated value estimate and a licensed appraiser to get an opinion on the property.

He eventually wanted to sell the property and pay off the investors. Once we gathered his information, including the appraisals and debts,  the mortgage proposal was around 70% of the LTV. The maximum of the LTV depends on the lender involved, but there’s some flexibility in an unstable market like this.

The lender and brokerage fees on the product we sold to Bill Smith were 12 percent interest and 6% for combined broker and lender fees. The property was sold less than a year later, and the investor got their money back.

Are You Looking for A Private Lender?   

Mortgage Broker Store focuses on private mortgage products. Those include second mortgages and others. Applications that don’t reach traditional lending requirements are one of our specialties. Our team of private lenders, brokers, and licensed mortgage agents is available. 

Email ron@mortgagebrokerstore.com or call 416-499-2122.

About Jonathan Alphonso

Mortgage Agent, Web Developer, and Real Estate Investor. Together with Ronald Alphonso I run MortgageBrokerStore.com. I write about a variety of topics on Canadian mortgages and real estate. Our particular specialty is dealing with Ontario power of sale and foreclosure situations.

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