Real Estate News

# Where to buy a rental property in Greater Toronto

Using MLS statistics and annually adjusted rental rates from CMHC, Zolo calculated the price-to-rent ratio in every neighbourhood in the Greater Toronto Area. The result is a list of the best neighbourhoods to buy an investment condo or townhouse

Those just starting out as property investors will probably want to keep their initial costs low and their cash-flow as high as possible. In general, this means acquiring a property in a neighbourhood where it makes sense to buy. That’s where a simple calculation can help you find an ideal neighborhood to buy a rental property in Greater Toronto.

The price to rent ratio is an easy mathematical formula that helps to identify real estate markets where buying is a better option. This ratio measures the relative affordability of property in a given housing market. It’s calculated by dividing the home price (or in this case, the average home price in a given neighbourhood) by the annual rental rate.

For example, the price to rent ratio for condos in Greater Toronto is 19.20. This is based on the average condo price divided by the annual average rental rate, or \$508,218 ÷ (\$2,206 x 12) = 19.20

But what does 19.20 mean?

As a general rule, a lower price to rent ratio indicates that it’s better to buy, while a higher ratio indicates a better rental situation. For real estate investors (or those on the fence about buying or renting) consider the following as a good guideline:

• For sure-bets, look for ratios below 15.49.
• For good bets, look for ratios between 15.50 and 21.49.
• Steer clear of any neighbourhood with a ratio above 21.50.

We analyzed the data for more than 400 communities across the GTA and found 134 top-ranked neighbourhoods to buy an investment property townhouse and 151 neighbourhoods where buying a rental condo makes sense in the GTA.

## New real estate investors

Consider the price to rent ratio as a quick method of determining whether or not to buy a specific property or in a particular geographic region. (For seasoned real estate investors, it’s also a helpful tool that can be used to compare the relative costs of buying and renting across different markets.)

Keep in mind, as aspiring landlords you will probably be competing with first-time buyers for condos and townhomes in these better-to-buy neighbourhoods. Plus lenders will expect you to put down 20% or more on the property and you will need to show that your debt-to-income ratio is low enough to take on the investment property debt. Finally, make sure you do your own analysis on the specific property you want to buy. Just because the average rental rate may be listed at more than \$2,400 per month for the City of Toronto, doesn’t mean that the average rent for every neighbourhood will be this high (or low). To be sure, do your research. Examine current ads to see what comparable properties are renting for and then run your own price-to-rent ratio. If you find the ratio is still on the buy-side and your analysis still shows a positive cash-flow each month, then it may be time to make the leap into becoming a landlord.

### Top 10 neighbourhoods to buy a townhouse as a rental property in Greater Toronto

1. Bendale, Toronto E09: Price to Rent Ratio: 4.40, Average Townhouse Price \$182,270
2. Weston – Pellam Park, Toronto W03: Price to Rent Ratio 5.35, Average Townhouse Price \$221,700
3. Rouge E10, Toronto E10: Price to Rent Ratio 5.40, Average Townhouse Price \$223,643
4. Wexford – Maryvale, Toronto E04: Price to Rent Ratio 5.54, Average Townhouse Price \$229,750
5. Bradford, Bradford West Gwillimbury: Price to Rent Ratio 5.72, Average Townhouse Price \$129,444
6. Rexdale – Kipling, Toronto W10: Price to Rent Ratio 5.82, Average Townhouse Price \$241,300
7. New Toronto, Toronto W06: Price to Rent Ratio 5.99, Average Townhouse Price \$248,333
8. Bayview Woods – Steeles, Toronto C15: Price to Rent Ratio 6.39, Average Townhouse Price \$264,750
9. Sherwood – Amberglen, Markham: Price to Rent Ratio 6.71, Average Townhouse Price \$146,444
10. Markland Wood, Toronto W08, Price to Rent Ratio 6.75, Average Townhouse Price \$279,750

### Top 10 neighbourhoods to buy a condo as a rental property in Greater Toronto

1. Rexdale – Kipling, Toronto W10, Price to Rent Ratio 4.30, Average Condo Price \$125,571
2. New Toronto, Toronto W06: Price to Rent Ratio 4.70, Average Condo Price \$137,222
3. Mill Pond, Richmond Hill: Price to Rent Ratio 5.30, Average Condo Price \$96,778
4. Greenwood – Coxwell, Toronto E01: Price to Rent Ratio 6.26, Average Condo Price \$182,800
5. Ionview, Toronto E04: Price to Rent Ratio 6.96, Average Condo Price \$203,056
6. Maple Leaf, Toronto W04: Price to Rent Ratio 7.69, Average Condo Price \$224,317
7. Elms – Old Rexdale, Toronto W10: Price to Rent Ratio 8.01, Average Condo Price \$233,829
8. Keelesdale – Eglinton West: Price to Rent Ratio 8.23, Average Condo Price \$240,163
9. Black Creek, Toronto W05: Price to Rent Ratio 8.42, Average Condo Price \$245,666
10. Crescent Town, Toronto E03: Price to Rent Ratio 8.50, Average Condo Price \$248,110

Romana King

Romana King is an award-winning personal finance writer and the current director of content for Zolo. King has contributed to business and lifestyle publications including CBC.ca, Toronto Sun, Maclean’s, MoneySense, Globe & Mail Custom Content Team, and Toronto Star. She is a passionate speaker about financial education and engages her audience on a variety of personal finance topics from kids and money, home buying and selling tips, and estate and investment planning. King won the 2015 SABEW Business Journalism award and is currently nominated for a COPA 2019 award, Best Service Article, for her annual project Best Deals in Real Estate. As editor of CI Top Broker, King guided her magazine to obtain its first KRW Business Journalism nomination, and she was part of the small team in 2011 that helped MoneySense win Magazine of the Year at the 34th annual National Magazine Awards.