Rooming Houses: Toronto Real Estate Investor Boon?
Published on 29 August 2022, 07:22:56 AM
A Toronto-wide zoning and regulatory regime for rooming houses could prove a boon for real estate investors.
The final proposal may be approved by Toronto City Council as early as November 2022. It caps a rooming house at six units in most areas, and up to 25 in denser zones.
Fires, nuisance tenants, or pest infestations in an illegal rooming house tax bylaw resources and make the units unsafe. The city has seen 16 fatalities in rooming house fires in the past decade.
So Toronto is out to strengthen licensing and enforcement, and apply it across York, which has no licensing requirements, Etobicoke, and Scarborough, which bans the dwellings.
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What is a Rooming House?
Multi-tenant houses in Toronto’s core are drafty, outdated Parkdale mansions that were snapped up in the 1950s when new tract houses made the suburbs more popular. A rooming house or SRO (single room occupancy) can attract students, new immigrants, pensioners, and working poor or unemployed tenants because rents start around $400.
Metro Toronto’s 350 or more licensed rooming houses are typical of SROs, with four or more tenants sharing a kitchen or washroom. Student housing, and long-term or institutional care homes are exempt. That hasn’t stopped unlicensed homes in Toronto, and the former cities of York, Scarborough, and Etobicoke, from flying under bylaw and zoning radars.
Convert a rooming house by buying an investment property.
How Big is the Rooming House Issue
Having a mix of tenants in a rooming house can be less noisy than having a frat house on your block, geography and urban planning professor Philippa Campsie told TVO. Still, fears about residents, and how a rooming house affects parking, property values, or noise can deter
homebuyers from moving next door.
Licensing helps, yet prejudice towards renters of any kind persists, Campsie says. What is a rooming house can be up for debate in suburbs. Most unlicensed SROs are invisible because owners don’t want the negative attention noise or disrepair attracts.
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Who Needs a Rooming House Licence
High risk operators, any unlicensed rooming house with a history of complaints or violations, and already licensed operators will be brought into the new regime in 2023. New and unlicensed operators are next.
The new proposal requires one bathroom for every four residents, and at least three parking spots for homes outside Toronto or major transit lines. A rooming house with 10 or more units will require an electrical evaluation, plus pest, property, and waste management plans.
The new tax on flipping houses in Toronto.
Where to Buy or Build a Rooming House
Under the changes, a six-unit rooming house will be permitted in most residential neighbourhoods, zoned RD, RS and RT, and a six- or 12-unit home in R zone. Apartment and high density zones (RA, RAC and some RM) will have a 12-room limit, and mixed use zones CR and CRE will allow up to 25.
What’s the Investment Opportunity?
All that makes buying a rooming house tempting for experienced landlords, and those inclined to hire them. With average one-bedroom apartments hovering around $2 044 in March 2022, it’s not hard to see why young people and lower-income renters are looking for alternatives.
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Running a rooming house may not be the easiest cash cow. But sales prices for four- to five-bedroom Toronto homes are up 11% to 12% in one year alone. Six-bedroom homes have climbed an outstanding 46%.
Buying and holding could just score handsome, down-the-road profits for you.
Why You Need a Real Estate Lawyer
Axess Law is at your call when you flip rooming house dwellings in Toronto, or anywhere in Ontario. We review offers to purchase for clauses that protect you from a buyer who refuses to close, or sales conditions that may not be to your best advantage.
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