Should I invest in the East or West side of Toronto?

First time investor, Jessica, lives in her mom’s home and ask what she should buy, what type of unit is best, if she should invest in the east side (king east) or the west side. Is investing in Regent Park still a good option?

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TRANSCRIPT

Andrew: Welcome to the Ask Andrew podcast. Real questions from real condo investors. You ask, I answer.

Hi, and welcome back to the Ask Andrew podcast. On today’s episode, I spoke to Jessica. Jessica’s a first time investor. She’s a prospective investor, I should say. She’s looking at getting into condo investing. She lives in her parent’s house and so, she’s been able to save up quite a bit of capital, and she’s ready to invest. And this is a very common situation. A lot of people that I talk to, they’re people in their late 20’s or early 30’s. They’ve been saving and saving. In many cases, they’ve been able to live in their parent’s place, so they haven’t had to pay rent. So, they’ve been able to save up quite a bit of money and they’re looking to get into the market.

So, we talked about what she should buy, what type of unit is the best type of unit for investment. We talked about investing on the east side of the city versus the west side of the city. The classic east side, west side debate. And, we talked a lot about investing in Regent Park and what that looks like, one of my favorite neighborhoods for investment.

So, I hope you enjoy my conversation with Jessica. And once again, if you’d like to be a guest on the Ask Andrew podcast, just go to askandrewpodcast.com, click on, “ask a question,” and I’d be happy to speak to you next and to answer your questions next on a future episode.

So, without further adieu, here is my conversation with Jessica.

Jessica: So, I’m new to the market. I don’t own any properties yet. I was a student and now working just over a year into my job. So, I’m finally looking into getting a first investment. Plus or minus to have it as a property that I’ll live in. I’m not sure yet if I’ll be living there as a primary residence, because I don’t have one yet, or if I’m just going to use it as an investment property from the start.

Andrew: Okay. And so, are you living at home right now then? With your parents, kind of thing?

Jessica: Yeah. So, my mom owns a house and she lives elsewhere because she remarried, so I’m currently living in her residence, which was empty.

Andrew: Oh, okay. So you got the place to yourself, nice.

Jessica: I do. But I want something of my own because it’s about time. Finally employed and making money, so I want to make a first step towards getting something for myself. Mostly for the future because this house here is my mom’s. It’s for her retirement. I want some investments of my own that I can draw on in decades to come.

Andrew: That’s great, yeah. That’s great. You’re looking to get started early. The earlier you get started, the better. That’s my one thing I always tell first time buyers is, one of my only regrets really is just not getting started in real estate earlier, even though it’s been very good to me, obviously.

So, you’re sort of debating between if you’re looking for something for yourself or if you’re looking for something just purely investment wise?

Jessica: Yeah. I think at this point, I’m looking at it as an option to move into. I’m looking for pre-construction. So, maybe in a few years time, it might be something that I’d be interested to move into. Although, if my life takes another direction, if I decide to buy a place with my partner, then maybe we’ll be living somewhere else. And at a minimum, I want one place that is my own property, my own finances, to have and to keep. So in that case, it might be an investment property.

Andrew: Okay. If you don’t mind me asking, are you paying rent right now? Or are you-

Jessica: Yeah, I help pay my mom’s mortgage right now.

Andrew: You pay some rent. Is it below what the market value is, kind of thing? Are you guys-

Jessica: Oh, for sure. Yeah.

Andrew: The family rate? Yeah.

Jessica: I give her about a thousand a month, which is very undervalued for a house.

Andrew: Yeah, for sure. No, that’s great. So, you’re in a great situation right now. You’re living very cheaply, you’re able to save money, I assume.

Jessica: Yeah.

Andrew: Yeah. So you have a leg up. You have an advantage compared to most people, which is great. It’s going to help you get something sooner, get something bigger, or be able to make a larger investment in the market, which is great.

Jessica: Yeah, and it’s also the reason that I can go with a pre-construction because I don’t need to move right this second.

Andrew: You don’t need to move. Yeah.

Jessica: I can sit here and kind of plan.

Andrew: Yeah. So, that situation is going to continue for you? Your mom’s not planning on selling the house anytime soon, type of thing?

Jessica: Yeah. No.

Andrew: Yeah, so that’s a great situation to be in. Generally speaking, somebody in your situation, I would definitely say, keep doing what you’re doing. I talk to people all the time who are living at home with their parents for free or for very cheap, kind of thing. If you’re at the stage of life where that works for you and you’re able to do that, and you have that opportunity, take advantage of it and use that time to save as much as you can, and to make smart investments.

A lot of people just rush into buying something that they can’t really afford or end up just barely scraping into something that doesn’t really work for their needs. Or, they end up renting and paying. Most people just end up renting and throwing huge amounts of money into rent.

Jessica: [crosstalk 00:05:43] Yeah.

Andrew: So, yeah I think if you were renting, market rates, I would say buy something for yourself to move into and get your principle res out of the way, and get that process started, and get that ball in your court, so to speak. Get that one taken care of before you start talking about investment properties. But, because you’re in your situation, I think it does make sense to look at buying an investment and like you said, a pre=construction makes a lot of sense because even if you do move into it, you’re not in any rush to do so.

Jessica: Exactly.

Andrew: Yeah. Everything you said so far makes a lot of sense from my perspective. So, when it comes to pre-construction, what are your thoughts? What question is on your mind or, you have specific projects that you’re interested in, you want to ask about?

Jessica: So, at this point, I’m looking for a one bedroom plus den with parking and locker. I have debated about going for a two bedroom, just to have the bigger size. Although, financially, it might be a little bit much because if I do end up wanting to get a place, lets say in a few years with my partner, I might want to invest money elsewhere as well. So, I don’t want to extend my self too much on the first thing that I invest in. So, I think a one bedroom with a den parking, and locker is kind of what I’m looking for.

Budget wise, will really depend on the location and I guess what’s out there but, it looks like it’s probably going to be something like 400 to 500’s that I’ve been seeing.

Andrew: Roughly how much do you have to invest?

Jessica: For a down payment, I think something around a ballpark of 100,000. A little bit more, a little bit less. Something like that.

Andrew: Okay, great.

Jessica: Yeah.

Andrew: So, with 100,000, you’ll have options, certainly. You can probably get into a two bedroom, maybe even a three bedroom, depending on the project. Yeah, based on what you’re saying though, my first advice on that would be just, I find it’s helpful to make that distinction before you get started.

Jessica: Yeah.

Andrew: In your mind, is this going to be truly an investment, or is this going to be something you’re going to live in? Because the way you’re talking in terms of one plus den, maybe two bed … I’m kind of reading between the lines but it basically sounds like you’re saying, you’re trying to forecast out your future needs of something you might move into?

Jessica: Yeah. I think for myself, one plus den would fine, to be honest. I think that’s probably the perfect size. So, that’s probably what I’d go for. I don’t know, in your opinion, for an investment strategy what’s better. To get the one bedroom or two bedroom. I’m not sure if there is a difference, if it’s better to go for a two bedroom, or if it doesn’t matter either way.

Andrew: Yeah, exactly. That’s what I’m getting at is, if you just mentally make that distinction before you get started in the process, you think about it, you commit to it as either an investment purely, or as something for yourself to move into purely. And then, everything else becomes much easier.

If you start to try to make the property do both of these things, that’s when I find things start to get muddled in your mind, and it’s harder to make a decision, and you’re trying to get a property to do two things at the same time.

Some cases it lines up, and those two properties end up a great investment as also something you want to live in. But in most cases, they’re two separate things. So, everything you said so far is, this is really an investment play for you, first and foremost. There’s maybe a chance that you might live in it but-

Jessica: Yeah, more than likely to be investment. That’s the most likely scenario.

Andrew: Yeah. With that in mind, I would suggest just basically, put on your investor hat and take off your end user or personal use hat. In a sense, don’t worry about what you would like or what might work for you in the future, and just think purely as a rational, logical investor mind and, what would be a good investment? What’s going to make me money in the long term? What type of property? What type of location? What layout makes the most sense as an investment? And, it’ll be much easier for you to make that decision on which one to buy.

So, with that being said, right away you said one plus den, parking and locker. I don’t know all the reasons why you came to that idea but, that is the most common condo unit that exists out there. That’s the most common thing that people tell me when I say, “What are you looking for?” Probably just because that’s what people think of when they think of a condo, is that one bedroom and a den, parking and locker. That’s the typical condo anywhere in GTA.

But, the reality is, that doesn’t necessarily mean it’s the best for investment. So, skip ahead, what is the best property for investment? What’s the type … In the past, two or three years ago I would say, definitely the smaller units are the way to go. So, studios and small one bedrooms are always going to be the best. This is what I would say in the past for investment for rental purposes. They’re going to give you the best cash flow. They’re going to be the easiest to rent out. And, those are the ones that you can’t really go wrong with.

In the past year or so, there’s been a major shift in the market. We’ve seen a surge in demands for two bedroom units. And, I don’t know if you’ve been listening to my podcasts and videos and stuff over the past year or so but, I’ve been talking a lot and advising people a lot to look at two bedrooms and three bedrooms. And, a big reason for this new demand that we’ve seen is because the low-rise housing prices have just gotten so out of control, and it’s so unaffordable for people that there’s suddenly this new wave of demand that we’ve never seen before of two bedroom and three bedroom units.

At the same time, over the past five years, there hasn’t been that many two and three bedroom units actually built and added to the system. Most of the focus has been on the smaller one bedroom units and studios from developers. So, there’s this situation now where the two bedrooms and three bedrooms suddenly make a lot of sense for investment whereas before, I would never really say that.

So, to answer your question, it depends. It depends on how much you want to invest. It’s up to you but, typically, most first time investors would tend to be more conservative and a little bit more risk adverse, which is normal and fine. And so, for your first one, most people would end up maybe buying something on the smaller side of things. A studio or a small one bedroom.

But at the same time, you might say, “Well, now that I’m comfortable with spending more,” I agree with argument. I think a two bedroom is a good way to go. So, you can look at that. There’s maybe an argument to be made at the current state of the market that it’s actually the one plus den, the stuff in the middle of the market, not the small stuff, not the big stuff. It’s maybe the stuff in the middle … You can perhaps make an argument and say that’s maybe the one area you don’t want to get into because there is a lot of that product out there, and there’s nothing too distinct about it compared to the small stuff. Everybody like the small cheap stuff. There’s always demands for cheap stuff. And then, the big stuff, as I said, the new demand is there because of everything that’s happened in the house price market.

So, all that being said as well, [inaudible 00:14:54] it really depends on the project. Each project has to be evaluated on its own. So, one plus den might make a lot of sense in one building because of their great value, great layout, it’s a great view compared to the other units, for example. But, in another building, maybe 80% of the building is one plus den. And then you say, if you buy one of those units then you’re going to be competing against a lot of other very similar units in the same building. You might want to get something that just, there’s fewer of them in the building.

So, yeah. A long answer to say … Hopefully there’s some vale you got out of that long winded answer there. But, yeah. Does that make sense?

Jessica: Yeah. No, definitely makes sense, for sure.

Andrew: Okay so, did you have any other questions at this stage of the game? Any other questions about the process or both specific projects that you-

Jessica: I think location matters to me, to a degree. I want to stick around the downtown area just because I think maybe the prices might hold better there. I used to live in King Street West for a long time. It’s a nice area.

Andrew: [crosstalk 00:16:15]

Jessica: Maybe a bit expensive, or growing more and more expensive now. A new area that I’m really interested in is King East. Or at least east of Younge. I know I’ve never lived in that area but I see it growing and I like it. It’s a little bit more quiet. It’s clean, nice, growing. So, that was one area that I was interested in upcoming developments. I did look at DuEast in Regent Park. And then, I have been [inaudible 00:16:51] on Kingly, in King West as well.

Although, that one I’m worried a bit about the value really of the units there. I’m not sure what kind of investment potential that would be but, I get a sense that DuEast might be fairly good for investment potential. I don’t know. Those were the two projects that I noticed, that are upcoming.

Andrew: Yeah. Two great projects. Kingly, right in the heart of King West, King and Portland. Very hot area, very popular. Like you said, it’s not a cheap area. It’s part of the expensive area now. It was up and coming ten years ago but those days are long gone and now it’s-

Jessica: Yeah. I know.

Andrew: It’s quite expensive now. Whereabouts did you live when you were in King West?

Jessica: Blue Jays Way. I lived, yeah.

Andrew: Okay.

Jessica: It was nice to live there. There was the icon [crosstalk 00:17:48]

Andrew: [crosstalk 00:17:48]

Jessica: I liked it. I really liked it.

Andrew: Yeah, no. That area is even more so than where Kingly is, even in terms of pricing.

Jessica: Yeah.

Andrew: Absolutely great area. But yeah, to DuEast. DuEast is obviously a project that I’m highly recommending to all my investors, and people who are buying for themselves. I’m a big believer in Regent Park. I’ve been preaching it, and selling it, and investing there myself for, what is it now, eight year? Going more than eight years. Almost nine years.

So, big fan of what Daniels is doing there and, there’s still tremendous upside there. The whole east side of downtown, you alluded to. There’s a different feel on the east side. There’s a different vibe. There’s a lot of potential.

Jessica: I think because I’ve been in the [crosstalk 00:18:44] so long. That’s it. Even if I don’t live there, I wrapped my head around the growing east and I kind of wanted to end up there when making an investment.

Andrew: Yeah. And I think, in one of your emails, you mentioned to me as well, access to the DVP. That’s a big draw as well for people in Regent Park.

Jessica: Exactly.

Andrew: For people who have to go north, it’s really the perfect spot. If you commute north, you’re on the DVP from Regent Park in like 30 seconds.

Jessica: Seconds. I know. Yeah, it’s the first turn off. It’s crazy. I went down to that area and I looked around to see what was there, what was developing. It’s pretty nice. They have a nice planned community.

Andrew: Exactly. Yeah, you can really feel it now. A couple years ago, you kinda see a little bit but it’s a little bit tough to envision. But now, you can really get a sense of what’s happening there, and there’s just so many cranes in the air, and so many buildings going up. There’s so much happening there. But, the value is still very, very good. It’s basically the best value downtown, and you get a very high quality product there for much cheaper than anywhere else downtown. And, there’s tremendous upside. Like I said, there’s still a big chunk of the neighborhood still yet to be developed.

So, there’s plenty more upside. Anybody who’s thinking that, “Oh, it’s too late to get in there because it’s already eight years into the redevelopment,” no. There’s still another eight years to go.

Jessica: Yeah. It’s like halfway through now.

Andrew: Yeah. [crosstalk 00:20:27]

Jessica: The only thing I might not like about that … I thought it was a bit big. The building, it looked a little bit large and, I don’t know. I’m not sure what the final architecture will look like but, I wasn’t wowed by the design that I saw.

Andrew: In terms of the DuEast building as well?

Jessica: Yeah. I don’t know. But I know for investment, it shouldn’t matter. But, when I lived at Kingly, I thought it was really nice, a nice neighborhood. You know?

Andrew: Right. Yeah, I know. That’s fair. Kingly is a very distinct architecturally designed building. It’s got that historic look to it with brick and kind of New York warehouse window.

Jessica: Yeah. [crosstalk 00:21:10] Exactly.

Andrew: It fits in with King West, right?

Jessica: Yeah. It’s got some [crosstalk 00:21:14]

Andrew: But its also going to be like 30% more expensive. 

Jessica: I know.

Andrew: So, yeah. But, the buildings in Regent Park, I would agree. They’re not going to wow you. They’re not going to win international … They’re not going to be on the cover of international design magazines or anything. But, in terms of the quality, what counts is the quality of the suites, and in the finishes, and the experience inside the units. That’s very, very good quality. As good or better than anything you would find elsewhere in downtown for much more money.

Jessica: Yeah.

Andrew: Yeah. So, that’s certainly a valid point, though.

Jessica: Yeah. And Daniels is committed to that are because they’re doing all the buildings. So its not like … They’ve got a very firm base there. You feel like they’ve already demonstrated that they can build their buildings and keep afloat, you know?

Andrew: Exactly, yeah. You’ve got a long track record now, this is going to be the eighth condo building. You can look at all the other buildings and see their still holding up very well.

Jessica: Yeah, it does.

Andrew: Their [crosstalk 00:22:28] are reasonable. There’s no management issues. They’re great buildings. Like I said, I own units in several of them so, I know first hand that everything is good.

Jessica: Is there anything else in Kings East area that you have up and coming that you’re aware of?

Andrew: Not at the moment, no. We had some good launches there last year. But, there’s nothing on the immediate radar screen for King East specifically right now, I would say.

Jessica: Okay.

Andrew: Yeah. So, if you’re thinking east side, DuEast is certainly going to sell out very quickly. That one is going to be launching soon. Kingly also will do very well and it will sell out right away. Big reason why is because it’s a small building. It’s only 130 units.

Jessica: Yeah.

Andrew: That one is considered already sold out basically because [crosstalk 00:23:33]

Jessica: Yeah.

Andrew: But, either of those buildings would be great. And certainly when the information is available on them both, I’ll of course send it to you, which should be very soon.

Jessica: Okay.

Andrew: And, you can take a look at that. But yeah, before that, is there any other … Did you have any other questions about the process?

Jessica: Not really. I understand they’re a payment structure and, 5% here, another 5% after 20 days. Again, a little more and then closing costs and things. So, no. I kinda read around it and have a sense of what it is.

Andrew: Good. Yeah, that’s great. Well, why don’t we leave it there for now? It’s good to start the conversation with you, and we’ll continue talking in the days ahead as these projects come out. And, once you actually have the information for these projects in front of you, it’ll be much easier to … We won’t be talking theoretically. We’ll be talking specifically and you can really actually make a decision if you want to move forward on them or not.

Jessica: I would say my one concern is, I wish there were more options like now that I would have to compare. Because, I honestly think Kingsley is probably not going to happen, given the small size, the price it will be for the amount of space you get. I think I’ll probably be less likely to go for that. DuEast is more reasonable. I find that more interesting. I just wish there was another option that I could say, “Well, here’s this,” and compare it to this. You know?

Andrew: Right.

Jessica: As a first investment. it would be nice to have a comparison just to see.

Andrew: Yeah.

Jessica: That’s why I asked you if there’s anything else you’re aware upcoming in the east. Because, I know the DuEast is going to come now. It’s going to come very soon. I would have to make that decision right away.

Andrew: Yeah. The good thing is, with any pre-construction purchase, you always have a ten day cooling off period. So, just keep that in the back of your mind. You do need to act quickly in this current market. You need to make decisions quickly. But at the same time, you always have your ten day cooling off period to sleep on it, to breathe, to do any comparisons that you want before you move forward with firming up the purchase.

But, it’s mostly just a function of the market. If you were having this conversation two years ago, then yeah, I would say, “Here’s four or five opportunities available right now, today, that are good ones, that have their merits. And here’s what they are, and here’s the prices, and here’s the floor plans. One, two, three, four, five, boom. And you can pick one.”

But, it’s just the reality of the market. Projects come out and they are selling out overnight so you don’t have that … It’s a very unique situation where it’s been a very busy year, so everything that has come out is sold out.

Jessica: Do you ever recommend not pre-construction? Going for places that are already existing? You ever invest in those? Or do you usually do pre-construction?

Andrew: Yeah, it’s a great question, and I have a video that explains my answer to that question more detailed. I’ll send it to you. But basically, the answer is, if you’re looking to buy for investment, always go pre-construction. If you’re looking to buy for yourself, then it depends.

Jessica: Yeah, for sure.

Andrew: There’s pros to both but, if you’re looking to buy just for investment, I always recommend that you go pre-construction, as major advantages that you can take advantage of.

Jessica: Yeah, I’m pretty set on that.

Andrew: I’ll make a note to just send you this little video that explains that in more detail.

Jessica: Have you lived in investments outside the GTA? Like, Markham is developing, or Richmond Hill, or Scarborough area. I don’t know if that’s experiencing the same kind of stability, or is similar to downtown.

Andrew: Yeah, I mean-

Jessica: My sense is that it was safer to invest in the downtown area. But I guess I’ll ask the question.

Andrew: Yeah, no. It’s a great question, and there are a lot more developments coming up outside the downtown core for high rise condos. More and more all the time as the entire GTA is intensifying and land is becoming more and more expensive, high rise living is definitely the future of southern Ontario.

But, that being said, I would say you’re right. Your gut instinct is correct, that all things being equal, in the long term, you’re going to usually get better appreciation, better demand for rent and for resale in the downtown core, for obvious reasons. It doesn’t mean that you should never invest outside the downtown core. There are opportunities that I have definitely promoted to my investors, especially in the past year, outside.

But, if you have the budget, which you obviously do, and if you’re just again, looking at it purely from an investment standpoint and you’re not looking at something to live in, most of the time, you’re going to want to be downtown. It’s hard to go wrong if you go downtown versus elsewhere.

Jessica: I like downtown, but in one of the areas that is developing like, Regent Park. Like the east side of Yonge. You know? That’s sort of where I wanted to aim.

Andrew: Yeah, great. Well, everything you’ve said so far is definitely pointing towards DuEast.

Jessica: I know, yeah. [crosstalk 00:29:45]

Andrew: So, I think you’re going to be very pleased when you see the package and everything that comes out in the next few days.

Jessica: Now, do you select certain models and things like that? Or how does it work from your end? Would you present me with all options, or some options you think are suited to me?

Andrew: Well, you’ll be available to select from all options but the reality is, when you’re buying at the early stage, you do need to be flexible. You do need to have multiple choices to increase your chances of getting something. If you come in, you say, “Andrew, I like DuEast. There’s 300 units in the building, I like this one or that one,” chances are low that I’m going to be able to get you the exact unit.

But, you say, “You know what? I like this floor plan on floors 10 to 25. And I like this floor plan on floors 8 to 22.” Whatever it may be then, okay. There’s a good chunk of units there. So you’re going to fill out a worksheet, which is your information along with the suits that you’re interested in, is what’s going to happen. And then, based on that worksheet, we’re going to do our best to match you with a specific unit that’s one of your choices.

That being said, before you make your choices, yes, I would certainly point out and recommend to you certain floor plans that I think are the ones to focus on, the ones that would better for investment versus ones that may not.

Jessica: Perfect. Yeah, that’s kind of what I was hoping. Sort of an expert opinion on what you think is maybe the better choices.

Andrew: Yeah.

Jessica: Okay, good.

Andrew: Great.

Jessica: Perfect. So, yeah I think that answers my question. I am interested in DuEast. I think that is probably, at this point, the one that I think is most interesting. But, definitely interested in anything else that does come up as well.

Andrew: Awesome, great. Well, looking forward to talking to you more, Jessica, And, looking forward to working with you.

Jessica: Thanks so much. Thanks for calling me. I appreciate it.

Andrew: Okay, thank you. Bye for now.

Jessica: Okay, thanks. Bye.

Andrew: Thanks for listening to the Ask Andrew podcast. To get your question answered, just go to askandrewpodcast.com and click, “ask a question.”