The case for investing in residential #Torontorealestate investment properties

The above tweet references a very interesting article. What is clear is that there continues to be a shortage of quality rental housing in Toronto. As a result, the demand for Toronto rentals has been high – including the demand for rental condominiums. In fact, it has been reported that “bidding wars erupted for the best condominium rentals“. The rapid building of condominium units (many of which are investor owned and become rental units) has masked this problem. The article also notes (quite correctly) that tenants have no “security of tenure” in privately owned condominium units. (This is because the landlord can either move in himself or sell the property. It is true even with the difficulties associated with selling a property with tenants in it.) Furthermore, although this is not widely discussed, rental condominiums put into service after 1991 are NOT subject to Ontario rental controls. That said, in a competitive rental market, landlords must be thoughtful about how to raise residential rents.

It seems to me that this article makes the case for investing in small apartment buildings or multi-unit buildings in Toronto. Remember that Toronto rental apartments with fewer than 7 units are subject to a lower property tax structure than larger buildings. At least one candidate for Toronto City Council raised this issue in the last election:

 

An interesting excerpt from the article includes:

Over the past decade, only a few hundred rental units have been built each year, in a city whose population is rising by almost 40,000 a year.

“There’s been insignificant construction of purpose-built rental for decades,” said Daryl Chong, president and CEO of the Greater Toronto Apartment Association.

“The consistent theme in most reports from city planning and other departments is we want more purpose-built rental,” Chong said.

While rental condos have helped fill the gap, tenants can get the boot any time the owner wants to sell.

“The fact that condos are being rented is not a good thing over the long term,” said apartment building broker Derek Lobo. “When the condo owner wants to sell, the tenant has to move. They have no tenure. That’s the issue.”

A shortage of rental accommodation is the price Toronto is paying for years of rent controls.