Crush High Interest Rates in Ontario with Secondary Dwelling Units

Crush High Interest Rates in Ontario with Secondary Dwelling Units


The world of real estate investing in the Greater Toronto Area (GTA) has undergone significant changes, with interest rates soaring to all-time highs in recent years. As a result, mortgage payments have nearly doubled or tripled from what they were just a couple of years ago. In this blog post, we will explore the challenges posed by the current high interest rate environment and offer practical solutions to help individuals and investors make the most of the real estate market in such conditions.

The Impact of Rising Interest Rates in Ontario

Interest rates have surged in the past couple of years, with variable rates sitting around six percent and fixed rates in the low fives. This has led to mortgage payments that were once affordable at around $2,000 to $2,300 now reaching close to $4,000 for an average $800,000 house. Affordability has become a significant concern for many potential homeowners and investors, as expenses rise while incomes struggle to keep pace.

Low Inventory and High Prices in Ontario

Compounding the issue, the real estate market is experiencing low inventory, which has led to increased competition for available properties. As a result, housing prices have not significantly adjusted to reflect the new high-interest rate environment. The combination of high prices and rising interest rates has made it challenging for people to enter the market or sustain their current properties.

Utilizing Rental Income to Offset Costs:

Amid these challenging conditions, there are solutions that can work to your advantage. One such strategy is to capitalize on the high demand for rental properties. With rental rates having increased by 30% to 40% since pre-pandemic times, renting out secondary dwelling units, such as basements or separate apartments, can help offset a considerable portion of your mortgage payment.

For example, if your mortgage payment was initially estimated at $2,300, renting out a basement unit for $1,500 to $2,500 can cover a significant portion of the cost, leaving you with an extra $20,000 or more in your bank account annually. This approach works especially well for single-family homes with potential rental units, as you can take advantage of the current rental market demand.

Considering Multi-Unit Properties:

To maximize the benefits of rental income, consider multi-unit properties. In the GTA, the average property may range from $900,000 to $1.1 million. Within this budget, it is possible to find properties with secondary units that can be rented out for up to $2,500, covering half of your mortgage costs. The extra $100,000 you may invest in such a property could be financed at a much lower rate, and the rental income generated would far exceed the additional monthly mortgage expense.

Exploring Garden Suites and Third Units for Further Savings:

An emerging trend in certain cities like Toronto and Hamilton is the opportunity to add a third unit to a property, such as a detached garage or an interior garage, depending on local regulations and building code requirements. By incorporating a third unit, you can significantly reduce your costs, potentially allowing you to cover your entire mortgage while residing in one unit.


Despite the current high-interest rate environment and its impact on the real estate market, there are still viable strategies for individuals and investors to navigate these challenges. Renting out secondary units, exploring multi-unit properties, and considering third units offer practical solutions to offset rising costs and build equity over time. By using these strategies as stepping stones, you can position yourself for future success in the ever-changing real estate landscape.

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