Rentals can create steady income and equity growth. You also hold a tangible asset that tends to move with prices. Those are real benefits of buying an investment property, but it is not for everyone. Success comes from calm finances, clear plans and the willingness to run a small business. If that sounds like you, then buying an investment property could be the right next move.
Practical Advice on Buying an Investment Property
Step 1: Get Clear on Your Goal
Decide whether you want cash flow today, equity growth over time or a house hack that lets you live in part of the home while renting the rest. A clear goal helps you filter neighbourhoods, property types and financing options quickly.
Cash Flow Today
Focus on what boosts monthly net income. Choose areas with transit access, schools and low rental vacancy rates. Keep operating costs lean by targeting lower property taxes, reasonable insurance, efficient heating and windows, and simple buildings without costly amenities that add monthly fees.
Equity Growth
If you can accept lower cash flow in exchange for long-term upside, look for markets with job growth and infrastructure investment. Make sure you can carry the property through soft patches without stress.
House Hacking
If you want a lower barrier to entry, consider living in one unit and renting another. Many lenders view owner-occupied financing more favourably, which can improve terms and qualification.
Step 2: Check Your Financial Readiness
Most non-owner-occupied purchases in Canada require at least 20 per cent down. When you buy investment property, add closing costs such as land transfer tax, legal fees, appraisal, inspection and title insurance. Keep six to twelve months of fixed costs in cash or near cash so you can handle vacancy and repairs without panic. Expect the Office of the Superintendent of Financial Institutions (OSFI) stress test to apply, which means you must qualify at a higher rate than your contract rate. Clean up consumer debt and lower credit utilization to improve your options.
Step 3: Choose a Buy Box
Create a narrow set of criteria so you can compare apples to apples. Define your location signals like job growth, transit access and amenities. Pick a property type that fits your skills and time, such as a condo, townhouse, duplex or a single-family home with a legal suite. Set price and rent targets that match your goal. For a first deal, favour light value add rather than heavy renovations. If you are buying an investment property for the first time, a simple property beats a complex one.
Step 4: Underwrite Like an Investor
Do the math before you get attached.
- Estimate market rent for each unit plus extras like parking or storage
- Apply a small vacancy rate so income is realistic
- Subtract operating expenses: property tax, insurance, repairs, management and any utilities you pay. This leaves your Net Operating Income (NOI)
- Subtract your annual mortgage from NOI to get cash flow and make sure there is a cushion.
- Check cash on cash return: yearly cash flow ÷ your cash invested.
- Stress test with a higher rate, one month empty and a surprise repair. If it still works, proceed. If it only works in perfect conditions, skip it.
Step 5: Assemble Your Team Early
Find a mortgage broker who knows how lenders count rental income and how legal suites affect financing. Work with a realtor who knows local rents and bylaws. Engage a lawyer or notary for the purchase and tenancy paperwork. Hire a home inspector who understands secondary suites and life safety. Speak with an insurance broker about a landlord policy and any endorsements you need. Add an adviser who can advise on rental income, deductible expenses and Capital Cost Allowance (CCA) or depreciation.
Step 6: Know the Canadian Rules That Matter
Tenancy law is provincial, which means screening, deposits, rent increases and evictions follow your province. Learn the standard forms and timelines before you buy. If a property has a secondary suite, confirm that it is legal for zoning, building code and fire egress. Illegal suites can jeopardize insurance and financing. If you plan to host short-term rentals, check municipal licensing and principal residence rules first because fines can be steep. These checks are core to buying investment property safely.
Step 7: Make Smart Offers
Use conditions to protect yourself and set clear deadlines. Get financing, inspection, insurance, and document review in writing before you go firm. Always verify income and suite legality before you commit.
If You Buy With Tenants
- Ask for signed leases, a current rent roll, and a payment ledger
- Request tenant estoppel certificates for small multifamily
- Confirm deposits and have them credited to you on closing
- If the listing claims a legal secondary suite, ask for permits and the occupancy permit
- If you need the home empty, negotiate vacant possession in the offer
If You Buy Vacant
- Ask for permits and an occupancy certificate for any suite
- Get a written insurance quote and conditional mortgage approval before you go firm
- If your lender will count projected rent, get a market rent letter
- Budget time and cost to place the first tenant after closing
H2 FAQs for Buying an Investment Property
Can a first-time home buyer buy an investment property?
Yes. Being a first-time buyer does not stop you from purchasing a rental. Most government incentives and land transfer tax rebates, though, are designed for homes you will occupy. Many first-timers house hack by living in one unit and renting the other to keep access to owner-occupied programs.
Can I buy an investment property with 10% down?
For a pure non-owner-occupied rental, most mainstream lenders expect at least 20 per cent down. Ten per cent down is usually only possible when you will live in the property and take out insured financing, which comes with premiums and stricter qualifications.
Can I use my RRSP to buy investment property?
You cannot use the RRSP Home Buyers’ Plan for a rental you will not live in. RRSPs can still fund real estate indirectly through REITs, MICs or, in some cases, arm’s length private mortgages inside a self-directed RRSP. Speak with your adviser and trustee about what is allowed.
How do lenders count rental income when I qualify?
Lenders typically use either a rental offset or an add-back. Expect them to count only a portion of rent based on a lease or appraiser market rent letter. The percentage and method vary by lender and property type.
Can I use a HELOC for the down payment on a rental?
Often, yes, if you can still pass the stress test and debt service ratios with the HELOC payment included. Interest on money borrowed to earn income may be deductible, but tax treatment depends on your situation, so get professional advice.
Should I buy the rental in a corporation or in my own name?
Most first-time buyers hold personally because financing is easier and rates are usually better. A corporation can separate liability and help with long-term planning, but rental income is often treated as passive, which adds tax complexity and costs for setup and annual filings. If you expect multiple properties, partners or higher-risk strategies, ask a mortgage broker and tax pro. Otherwise, starting in your own name is usually simplest.
Ready to start buying an investment property? Connect with your local REMAX agent for clear advice, on-the-ground comps and access to vetted listings. Book a quick call today.
