The Best Cities for Torontonians to Rentvest In | Zoocasa Blog (2024)

It’s often suggested that for Torontonians to afford a home in today’s pricey real estate market they should move to more affordable cities like Calgary, Kitchener-Waterloo, or Saint John. But what if you don’t want to give up the metropolitan life Toronto has to offer? That’s where “rentvesting” comes in.

Rentvesting is an equity-building strategy where you purchase a property in a more affordable city and rent it out to earn investment income, while simultaneously renting a home in a typically more expensive city where you prefer to live. After a few years of earning monthly income from your tenants and building equity in your investment property, you can sell it and use the gains for a down payment on a home in your desired city.

For a Torontonian, this could mean buying a condo apartment in Regina, where the average price is more than three times less than that of an average apartment in Toronto. By renting it out for five years and earning rental income, they could accumulate enough funds for a down payment on a condo in Toronto.

So where are the best cities for Torontonians to rentvest in to achieve their homeownership dreams? To find out, Zoocasa calculated the maximum mortgage amount that the average income in six GTA cities could afford. We then analyzed average condo apartment prices across Canada, comparing the average rent and the average monthly mortgage payment in each location to determine where Torontonians could afford to buy and where investments would potentially be profitable.

With an average annual income of $62,050, a homebuyer from Toronto can comfortably afford a mortgage amount of up to $275,402. This means a homebuyer from Toronto can afford to buy a condo apartment in Edmonton, Regina, St. John’s, Saskatoon, Saint John, Winnipeg, and Calgary, which all have average total mortgages below $275,000. Of those, Edmonton and Regina are the most affordable choices, with average condo apartment prices of $163,452 and $183,630 respectively.

• Read: How to Qualify for a Mortgage if Your Credit Score is Low

Those living in Burlington have a slightly higher average annual income of $66,100, allowing them to afford a maximum mortgage amount of $293,378. With a total average mortgage amount of $292,720, investment buyers from Burlington can afford to purchase a condo apartment in Moncton. Moncton was ranked as the top city to buy real estate in 2024 by Moneysense, written in partnership with Zoocasa. This ranking is largely due to Moncton's consistent economic growth, with home values appreciating by 98% over the past five years, providing an excellent investment opportunity for Burlington buyers.

Etobico*ke has the highest average annual income of the six GTA cities we analyzed and, as a result, can afford the largest mortgage amount at $307,137. Though home buyers from Etobico*ke are just a few hundred dollars short of being able to afford a condo apartment in Brantford Region and Windsor-Essex, they could potentially earn monthly rental income to make up the difference in their investment. And if buyers from Etobico*ke are able to save for longer, cut back on spending, or earn additional income, they could potentially afford a condo apartment in Oshawa, which has an average price of $420,575 and a total mortgage amount of $336,460.

In 14 cities, a condo investment property has the potential to earn monthly gains thanks to the average rent being higher than the average monthly mortgage payment. For buyers from the GTA, this means an opportunity to not only profit from their investment but also potentially cover their own monthly rental payments. This additional income can help them save more effectively and ultimately afford their own home in the future.

Edmonton offers the highest profit potential, with average rents at $1,553 and average monthly mortgage payments at just $886, resulting in potential monthly gains of $667. Calgary is the next best option, with the average rent at $1,954 and the average monthly mortgage payment at $1,480, which is $474 below the average rent.

• Read: Save Big: The Impact of Increasing Your Mortgage Payment Frequency in Canada

Other cities with potential monthly gains exceeding $300 include Regina, Saskatoon, Winnipeg, Ottawa, and Halifax-Dartmouth. While the total mortgage in some of these cities, such as Halifax-Dartmouth, might be higher than what the average income in Toronto can afford, the potential monthly gains can make the investment worthwhile. For instance, in Halifax-Dartmouth, the average condo apartment costs $466,800, which is nearly $300,000 less than an average apartment in Toronto. If Toronto earners can supplement their income, they can take advantage of these more affordable markets and the significant profit potential.

What to Consider Before Rentvesting

Obtaining a mortgage for an investment property is slightly different than obtaining a mortgage for a residential one. Compared to a traditional mortgage, a mortgage for an investment property requires a higher down payment, typically at least 20%, and can have stricter credit score and debt-to-income ratio requirements.

It’s also important to note that you cannot use the First Home Savings Account (FHSA) to buy an investment property, as these funds are only allowed for the purchase of primary residences. However, you may be able to qualify for special tax deductions, such as being able to deduct mortgage interest, property taxes, insurance, and maintenance costs from your rental income.

While owning an investment property comes with new responsibilities, such as managing tenants, adhering to local landlord regulations, and handling unexpected repairs, the financial rewards can be highly worthwhile for the right investor. If you’re willing to wait a few years, you will almost certainly reap the benefits of your investment, as property values will appreciate over the long-term.

Have questions about buying your first investment property? Our agents can help! Contact us today to speak with a local real estate agent in your area who will help guide you through the home-buying process.

Methodology:

Average condo apartment prices were sourced from the latest release from the Canadian Real Estate Association, the Toronto Regional Real Estate Board, and local real estate associations. The average monthly rent was sourced from Rentals.ca and Zumper.com by finding the average of both 1-bedroom and 2-bedroom apartments. The average total income for each city was sourced from Stats Canada.

The maximum mortgage amount the average income can afford was calculated using the True North mortgage “How much home can you afford” calculator, assuming a 5-year fixed rate of 4.29% and an amortization period of 25 years. Taxes, insurance, heating and other expenses or debts were not factored in the calculation.

The total mortgage and average monthly mortgage payments were calculated by assuming a 20% down payment, an amortization of 25 years, and a 5-year fixed rate of 4.29%.