These urban rental units can boost property values

Homes affixed with laneway rental units benefit from significant boosts to their value compared to neighbouring abodes, said a real estate professional during a recent new webinar from liv.rent.

“I’m very much a big believer in multi-family homes, even in an environment where people are struggling, because they will always need a place to live,” Bradley Watson, strategic JV specialist and broker with Watson Estates, said during the webinar. “The specific property types people are looking for, one of them is coach houses, or laneway houses, at least in these dense urban cores. In Toronto, we see some of these homes going for a million over their neighbours’ just because of having the opportunity to have a laneway house put in behind. There’s a lot of push for the city and other government levels to move towards laneway housing to deal with the supply issue and I think that’s a great opportunity.”

Another way investors can enhance the ROI on rental properties is to find undervalued properties by going off-market—that is, properties that aren’t listed on platforms like the Multiple Listings Service—says Watson. In fact, he recommends not being afraid to approach wholesalers.

“There’s also the opportunity to buy undervalued properties. I’m well connected with people who are in off-market power-of-sale deals. There’s tremendous opportunity there because there are still struggling people who have a place they have to get rid of and you can jump on those.”

“If [realtors] can get their client a property for $100,000 below what the market’s going for, you don’t think they’re comfortable paying your commission for you? Absolutely. That’s what I’ve been leaning towards in my business as a real estate professional recently.”

As for where in the Greater Toronto Area investors should extend their search to, Watson recommends Windsor and the Niagara region, as well as secondary markets like Hamilton. The COVID-19 pandemic sparked an exodus from urban centres, including smaller cores like The Hammer, and he says such decisions could prove premature.

“They’re thinking, ‘I’ll never need to go back to the office,’ but there could be a little bit of overplay here where people are leaving too early,” said Watson. “The trend to leave the city existed pre-COVID. It’s not like this is a new thing. The only difference today is immigration filling in the gaps is still at a bit of a standstill.”

While there’s merit to downtown Toronto investors’ concerns about supply outpacing demand, once the COVID-19 pandemic passes, the inverse is likely to occur.