Build wealth through real estate. Our comprehensive guide helps Canadian investors understand financing options for rental properties, multi-units, and investment real estate.
Investment properties require different financing than primary residences. Here's what you need to know.
Any property purchased to generate rental income that is not your primary residence is considered an investment property.
Investment properties require larger down payments than primary residences in Canada.
Investment property rates are typically 0.15% - 0.50% higher than primary residence rates.
Lenders typically use 50-80% of projected rental income to qualify you for the mortgage.
GDS and TDS calculations include all your properties, not just the investment property.
Investment property mortgages have stricter credit requirements than primary residences.
Meeting these requirements will position you for approval on your investment property mortgage
Minimum 680 credit score
Professional appraisal required
Comparable rental rates in area
Landlord insurance quote
For serious investors
Purchase agreement, title search
Most Canadian lenders have limits on the number of investment properties they'll finance:
Different property types have different requirements and investment potential
Detached or semi-detached homes rented to single families. Most common entry point for new investors.
20% minimum
Properties with 2-4 separate rental units. Popular among experienced investors for diversified income.
20-25% (depends on units)
Individual condo units in buildings. Lower entry cost but with condo fees and special assessments.
20% minimum
Properties combining commercial and residential space. Common in urban areas with retail on ground floor.
25-35% (commercial component)
| Property Type | Min Down | Best For | Management Level |
|---|---|---|---|
| Single-Family Home | 20% | First-time investors | Low |
| Multi-Unit (2-4) | 20-25% | Growth investors | Medium |
| Condo | 20% | Low maintenance preference | Low |
| Mixed-Use | 25-35% | Experienced investors | High |
Choose the right strategy based on your goals, timeline, and risk tolerance
Focus on generating positive monthly income after all expenses (mortgage, taxes, insurance, maintenance).
Example: $500,000 property with $100,000 down (20%). Monthly rent $2,500, expenses $2,200 = $300 positive cash flow.
Buy in high-growth areas where property values are expected to increase significantly over time.
Example: $700,000 Toronto condo. Slight negative cash flow, but $35,000-70,000 annual appreciation (5-10%).
Buy, Rehab, Rent, Refinance, Repeat. Build a portfolio by recycling your capital.
Risk: Requires renovation skills, carries more risk. Budget 20-30% over estimates for unexpected costs.
Live in one unit and rent out the others. Great first step into real estate investing.
Note: Must occupy as primary residence to qualify for lower down payment. Live there 1+ year.
Let's discuss your financial goals, timeline, and risk tolerance to determine the best investment approach for your situation.
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Understanding tax implications of investment properties in Canada
These expenses can be deducted from your rental income to reduce taxable income:
Interest portion only (not principal)
Annual municipal property taxes
Landlord/rental property insurance
Current expenses to maintain property
Professional management services
Heat, hydro, water, internet
Costs to find tenants
Professional fees related to property
Depreciation deduction on the building (not land). Be cautious:
⚠️ Important Warning:
Claiming CCA can trigger capital gains recapture when you sell. Many landlords choose NOT to claim CCA to avoid this. Consult your accountant.
4% annual depreciation rate
Only building value can depreciate
CCA claimed is added back to income when sold
Investment properties are subject to capital gains tax in Canada (primary residences are exempt).
Residential rental properties are generally GST/HST exempt, but there are exceptions:
This guide provides general information only. Tax rules change frequently and your situation is unique. Work with a qualified accountant who specializes in real estate to maximize deductions and minimize tax liability legally.