Multiplex economics

Real estate is one of the safest investment channel. It's not surprising that in city Toronto, about 30% of the condo/houses are owned as investment properties. Even for the rest of home owners, many of them consider the home partially as an investment, where it stores their household savings.

Traditionally, in Toronto market, there are 3 major housing types:

• Detached house

• Townhouse

• Condo

The following chart showed your potential investment return of these three types compared with a Multiplex building (by PolyPrime). There are a few key assumptions to make the comparison relatively fair:

• When calculate mortgage payment, only interest payment is counted

• Real interest rate is 2.5% ( while nominal interest rate is 4.5%)

• As individual investor, to maximize your return, you would build your own detached house, of 3500 sqft

  • If you had to purchase from a builder, extra 13% HST occurs

• The townhouse is 3 bedrooms, 1200 sqft

• The condo is 2 bedrooms, 800sqft

The resulting investment return shows that:

• Townhouse and condo are still reasonable investment, with 5.4% or 4.1% annual return

• Detach house return is very poor as an investment, mostly because the land acquisition cost is too high today

• Ultimately, Multiplex could achieve 32.75% annual return, way higher than the other three types.

  • One Multiplex building would be about $122K/year Net Income