Real-Life Example of a Free Renovation

Real-Life Example of a Free Renovation

How to get your money back after a renovation.

One of the things that we hear over and over is: Isn’t Toronto too expensive?  Isn’t Toronto too risky? There aren’t any good investment properties in Toronto.

To those people, we reply “It’s just because you aren’t working with the right Investor Realtor”.  

We get it.  Investing in Toronto is tough.  It’s a lot harder to invest in Toronto than it is to invest in Hamilton, or Windsor or Waterloo.  It’s a lot harder to find a cashflowing property in Toronto… but it is very much possible if you’re looking at real estate through the right lens.

Not everything in Toronto will be handed to you on a silver platter.  Because property prices are much higher, it means that mortgages are much higher… and as a result, it is harder to obtain cashflow positive properties.  While they do exist, and while we do find them for clients, they are far and few between.  This leads some investors to create those opportunities themselves.

One of the best investments in Toronto is a Legal Luxury Triplex conversion.  It does take considerable resources to undertake, but for those who have the means, it is a solid way to invest.  Not only do you get the equity upside from the change of use from a single-family to a legal triplex, but you already get increased rents.  And after refinancing at the higher property valuation after the renovation, you can often get back almost all of your renovation money back in the form of an equity takeout.

Here is a recent real-life example of a Legal Luxury Triplex conversion that a client completed:

  • Acquisition: $1.3M
  • Downpayment (20%): $260k
  • Mortgage (80%): $1.04M
  • Closing costs & LTT: $50k
  • Reno: $500k
  • Length of reno: 12 months
  • Carry costs: $60k
  • Total invested capital (downpayment, closing, LTT, reno, carry costs): $870k
  • ARV Market value: $2.1M
  • ARV as per appraisal: $2M
  • Refi mortgage (80%): $1.6M
  • Equity takeout: $560k
  • Net invested capital: $310k

Just to put it in perspective, $310k of invested capital would normally only be enough for an $1.3M property ($260k downpayment + $50k closing/LTT).  But instead, our investor is holding a $2.1M property for that same amount of capital.

And then with rents at $8400 across those 3 units, and expenses at about $1200 and mortgage payments at $6000, the property cashflows about $1200… even after the increased mortgage!

At the same time, it took a lot of time and effort to create this opportunity.  We illustrate this example to demonstrate that there are indeed solid investment opportunities in Toronto if you have the capital, mortgage qualification, and savviness to make it happen.  It might not be for everyone, but if you think this might be for you, reach out to us and let’s have a conversation about it.

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