Curb appeal is a powerful factor in the market value of a home. That’s why, in the Greater Toronto Area (GTA), homes tucked away in an alleyway, rather than facing the street, often sell for as much as $100,000 less than an equivalent piece of real estate boasting street frontage.
Does the curb appeal of a house really impact the true “worth,” of a piece of real estate? The answer to that question is largely dependent on personal preference, and the value you as an investor assign to curb appeal.
How much does curb appeal matter (to you)?
Even if a home doesn’t have frontage on a prominent street, it’s still a functional piece of real estate. In fact, some prospective tenants may actually view it as an asset if a home is removed from the street and tucked away along a quiet thoroughfare.
Savvy real estate investors can view alleyway homes as a strategic investment requiring less capital up-front, but still possessing a strong earning potential.
In fact, alleyway homes may be an even more lucrative investment in the near future. As Canada’s cities become more crowded and unaffordable, local governments are working to maximize use of existing space. In Vancouver, a 2016 pilot project focused on activating alley space and making it more attractive, debuting to massive success.
As cities across Canada work to make more efficient use of laneway space, alleyway homes may see their curb appeal rise.
Laneway homes vs. alleyway homes
It’s easy to confuse laneway homes and alleyway homes. It’s important, however, to point out the distinctions separating these two types of real estate products.
Alleyway homes are a longstanding component of Toronto’s urban landscape. They are townhomes and condominium buildings without frontage along a main street. Instead, their front doors open out onto alleys. This can make them challenging to find—although, this isn’t necessarily a bad thing.
In an exceptionally active real estate market, like that of the GTA, alleyway homes may sell for less money or may be less conventionally attractive than homes with street frontage.
Laneway homes were recently legalized in Toronto. Laneway homes are secondary residences sitting on property occupied by a primary residence. Laneway homes are a type of secondary suites usually owned and rented out by the owner of the primary residence with which they share a plot. Like alleyway homes, laneway homes typically don’t have street frontage. Instead, they face the alley behind the primary residence.
Laneway homes are an affordable investment solution for people who already own homes in an area of the GTA where laneway homes are permitted. They represent a relatively small investment compared with purchasing a traditional building. Additionally, these homes may be more attractive for tenants, because they offer the privacy and convenience of living in a single-family home, without the costs associated with renting out an entire abode.
Alternative real estate investments to make in the GTA
If purchasing a single-family home or an entire apartment building in the fast-paced GTA real estate market seems out of your grasp, don’t despair. There are many housing types creative investors can use to secure a foothold in the GTA’s real estate scene, including the following:
•Alleyway homes: Alleyway homes are just houses, townhomes or condominiums without street frontage. Instead, they face an alleyway. This means they can cost thousands of dollars less than traditional homes, while still maintaining the same level of functionality. Alleyway homes are a great tool for creative investors hoping to save some capital while investing in the GTA.
•Secondary suites: Secondary suites are built-in rentals within a primary residence. They have their own entryway, kitchens and bathrooms. Toronto recently loosened regulations on the construction of secondary suites within primary residences, making it easier than ever before to convert part of your home into a secondary suite and generate rental income.
•Condos: Purchasing a condominium unit as an investment property isn’t always easy. Many condo associations place restrictions on how investors can purchase and use condominium units. If you identify a condo as an investment property, it could be a lucrative urban investment opportunity presenting a much lower barrier to entry compared to a single-family home or apartment building.
•Townhomes: Townhomes are single-family houses sharing walls with adjacent homes. Townhomes are especially popular in mid-density neighborhoods, including areas of the GTA rapidly gentrifying. Compared with freestanding single-family homes, townhomes are considerably less expensive. Purchasing a townhome as an investment property could be an excellent opportunity for savvy investors familiar with their target neighborhood and tenant.
•Laneway homes: Similar to secondary suites, laneway homes in the GTA are smaller, secondary residences sharing a plot of land with the owner’s primary residence. Unlike secondary suites, laneway homes are freestanding, providing the tenants with more space and privacy. Recently-loosened city regulations are making it easier to build laneway homes in Toronto. It’s worth noting, however, laneway homes can’t be sold independently of the primary residence.
If you don’t already own a residence in Toronto and don’t want to navigate the challenges associated with investing in a condo or townhome, you may want to work on identifying affordable sub-markets of the GTA, yet still represent a good potential return on your investment. West Hill, Malvern, Rouge and Centennial Scarborough all represent affordable neighborhoods with excellent growth potential.
Regardless of the tools you end up using to invest in the GTA market, you’re sure to reap substantial income and see consistent appreciation on your asset. While the GTA real estate scene may be cooling off temporarily, it means now is the ideal time to make your mark and acquire an investment property in Canada’s largest urban area.
If you haven’t thought about an alleyway investment yet, it might be worth consideration. Don’t let the lack of street frontage dissuade you—this might actually be the property’s biggest asset! Get familiar with the alleyways of the GTA and see if you can turn up a great investment opportunity!