When investors enlist our brokerage, LandLord Realty Inc., to help them find high performing investment properties in Toronto, our 20 years of property management often steers the discussion towards the multiplex investment.
Why a multiplex investment?
We at LandLord manage all sorts of residential investment property across Toronto and the GTA. From waterfront condos to North York multiplexes, we have managed billions worth of Toronto real estate.
Whether our clients are seasoned investors or new to real estate, multiplexes under our care have unequivocally been the most secure and profitable investments in our portfolio.
A great many of the multiplex investment properties in Toronto are located in the city’s most desirable neighbourhoods and started life as single-family homes. Over time, as the city’s density increased, they were reconfigured and repurposed as multi-unit dwellings.
Multiplex investment properties are essentially small apartment buildings. Small ones, yes, but apartment buildings nonetheless. The higher density of tenants at a property drives rental rates to high levels, but one of the key advantages is the dependability of cash flow from their multiple tenants. An unforeseen vacancy can be weathered with other rent cheques still coming in. The process of finding a suitable replacement tenant can proceed with somewhat less urgency than in the case of a single empty condo unit.
When many first time real estate investors look to buy a piece of the Toronto market, they typically look first to condos. Certainly the current dearth of inventory of detached homes make condos an obvious target. They also carry with them the perception of being a hassle?free investment, which has some merit.
While attractive for seeming straightforward investments, condos in Toronto are resale value laggards, with resale values rarely increasing by more than 5% (and many much lower) year over year. Compare that to detached homes and multiplex investment properties, which in many cases have been running well over 10% for multiple years. For the serious investor, multiplexes are by far the more attractive investment.
Multiplexes in particular are a segment of Toronto’s real estate market than many investors overlook when looking to acquire property in the city. While the continually surging condo market seems to make the most news, multiplexes in fact offer an opportunity for much greater returns.
Higher quality tenants
Toronto’s rental housing stock is dominated by monolithic decades-old apartment high-rises and more recently-built – and equally monolithic – condo high-rises. Buildings of either type contain large numbers of units for rent by many of their owners. Neither of these are typically situated in the city’s most desirable, well-established neighbourhoods most coveted by tenants.
Affluent neighbours, accessible transit, and nearby amenities are available in varying qualities and quantities across the city; older multiplex investment properties tend to boast the best of the best.
As much as condo developers would love to build a brand?new tower in these areas, the communities and zoning won’t allow for it.
These properties are magnets for the city’s best tenants; owners reap the rewards of tenants who are better able to pay the rent, stay longer, behave better, and take better care of their unit.
The construction of Toronto’s older multiplexes tends to be more robust than what you might find in a modern condo building or even new-build house. The saying “they don’t make them like they used to” certainly applies. The opportunity afforded the savvy investor by timeless appearances and solid construction quality is to boost the already?high rental value of these properties through remodeling.
A profitable remodeling project goes far beyond applying a fresh coat of paint. Choosing finishes that will appeal to the widest cross section of potential tenants allows one to pick from a pool of applicants who are more likely to pay top dollar, and stay longer in the unit.
The cost of work which may well endure for two or more decades can often be recouped after only five to 10 years. In a market saturated with smaller, vanilla, lower?quality condo apartments, we have seen this proven time and again to be money well spent.
See actual ROI numbers of properties we’ve remodeled here.
When it comes to older multiplexes, particularly those of Victorian or Edwardian vintage, there’s the added value of a property of ever-increasing uniqueness. We are simply not making any more multi?unit dwellings of the quality that are found in Toronto’s older neighbourhoods.
These properties offer perhaps the best combination of return and security in the Toronto real estate landscape. In a market awash with high prices and low on inventory, that’s confidence you can take to the bank.