You have been working hard for the past few years saving for your first investment property. I will not speculate as to why you have chosen to invest your hard earned dollars in real estate instead of stocks or mutual funds, but I reckon that just like myself, it’s your passion and you want to try yourself as a landlord. You have your 20% set aside and ready to go at a moments notice.

You find yourself browsing Realtor.ca as well as visiting pre-construction presentation centers but are not yet sure what suite type to purchase. Should you stretch your budget and get a 2B to rent to a couple of students, a large 1B+Den, or a small studio? The answer to this question is based first and foremost on your financial abilities BUT, there are a few cardinal rules to follow.

When you are buying an investment property you should purchase the smallest unit of that particular suite type. This means if you are looking at 1B+Den units, you should look for a suite with the smallest interior square footage. Reasoning behind this is simple, there just isn’t much difference between rent that can be charged for a 580sq ft. vs. 700 sq ft. 1B+Den.

Lets take Festival Tower in the Entertainment District as an example to illustrate my point. Smallest 1B+Den at this building is called the Keaton (619 sqft.) and the largest is the Pacino (683 sqft.). There is a variance of 64 sq.ft of interior space between these two suites, which at an approximate price per square foot of $700 is a purchase price difference of $45,000. Both of these suites on the 15^th and 17^th floors leased for $2,000 per month in mid 2013.

There are lots of agents and builders out there that advocate Studios (aka Bachelor) as the ultimate investment property. Fact is, although studios may bring you positive cashflow, due to their low purchase price, low maintenance fees and property taxes; the tenant quality may suffer. Landlords often have such a hard time leasing out their suites that they take a month-to-month or any short-term lease that comes their way. Turnover is high which turns a hands-off investment into a cumbersome endeavor. TREB Rental Market report clearly indicates that out of any suite type, the most frequently leased suite type is a 1B with 4404 condominium apartments lease transactions in the 3rd quarter of 2014. Bachelors pale in comparison with only 231 reported transactions. These numbers do not take in account the total available suites for lease in each category but the variance is so great that it only proves the fact that a bachelor suite is still quite a hard concept to wrap your head around for most Torontonians.

In my opinion, the best suite type to consider for investment purposes is a small 1B. Not only will the asking price be relatively low which will provide you with an abundance of applicants to screen but it has a higher chance of being cashflow positive with a relatively low downpayment. Your tenants will thank you for additional level of privacy and will likely stay for many years.

With 1.7% GTA condominium vacancy rates we should all buy one!