How to Invest in Real Estate in Canada: A Beginner's Guide

Ways to Invest in Real Estate in Canada

There are four common ways in, and they differ in the cash you need, whether you can borrow, and how much work you take on.

Buy a rental property. You buy a condo, a house or a small multi-unit building and rent it out. You control the rent, the tenants and when to sell, and a mortgage lets a 20% down payment control the whole property. In return you handle the repairs, the vacancies and the tenancy law. See buying your first rental property and condo vs house investing.

Live in one unit and rent the others. A duplex, triplex, fourplex or house with a legal suite is financed as your home when you live in it: CMHC insures owner-occupied homes of one to four units with as little as 5% down on one or two units and 10% on three or four. The other units' rent helps carry the mortgage. Check that those units are legal under local zoning and building rules before you count on their rent.

Buy REITs or real estate ETFs. A REIT owns buildings such as apartments, warehouses or offices, and its units trade on a stock exchange; a real estate ETF holds a basket of them. You can start with the price of one unit, sell on any trading day and never deal with a tenant, and units listed on a designated exchange such as the TSX are qualified investments for a TFSA or RRSP. You give up control and mortgage leverage. See REITs vs direct real estate.

Buy pre-construction. You sign with a builder, pay deposits while the unit is built and close when it is finished, often years later. You must qualify for the mortgage at closing, at that day's rates; if the unit appraises below your price, the lender may lend on the lower value and you cover the gap; and projects can be delayed or cancelled. Profit from selling the contract before closing (an assignment) is business income, and GST/HST applies to the full amount received for assigning a new home. The first-time buyer GST/HST rebate and Ontario's enhanced new housing rebate only apply to a home the buyer (or, for Ontario's, a relative) will live in. See pre-construction assignment sales.

How Much Money Do You Need to Invest in Real Estate?

For a rental you will not live in, plan on at least 20% down, plus closing costs and a cash reserve. If you live in one of the units, the down payment can be as low as 5%.

The difference is mortgage default insurance, which a down payment under 20% normally requires. CMHC's low down payment insurance is for owner-occupied homes, and its insurance for rentals you do not live in (two to four units, priced under $1,000,000) still stops at 80% of the value. For a home you live in with one to four units, the minimum down payments are:

• One or two units: 5% of the first $500,000 of the price and 10% of the rest.
• Three or four units: 10%.
• $1,500,000 or more: 20%, because insured mortgages stop below $1.5 million.

The insurance premium is added to the loan: 4.00% with less than 10% down, 3.10% with 10% to 14.99% and 2.80% with 15% to 19.99%, plus 0.20% for a 30-year amortization, which on an insured mortgage only first-time buyers and buyers of newly built homes can take. Ontario, Quebec and Saskatchewan charge provincial sales tax on the premium, and that tax cannot be added to the mortgage.

Example: an $800,000 duplex. If you live in one unit, the minimum down payment is $55,000 (5% of $500,000 plus 10% of the other $300,000). The premium is 4.00% of the $745,000 loan, or $29,800, for an insured mortgage of $774,800. Bought to rent out both units, the same duplex needs $160,000 down and a $640,000 mortgage. Living in it cuts the cash you need up front by $105,000.

Living there also lets you use the Home Buyers' Plan (up to $60,000 per person from RRSPs) and the FHSA (up to $40,000 of lifetime contributions). Both require that you intend to live in the home within a year of buying it, and the Home Buyers' Plan accepts an apartment in a duplex, triplex or fourplex. See down payment requirements and the minimum down payment calculator.

Leverage works both ways. With $120,000 down on a $600,000 property, a 5% rise in value adds $30,000 to your equity, a 25% gain on your cash. A 10% fall costs you $60,000, half your equity. Keep a cash reserve after closing for vacancies, repairs and a higher payment at renewal, so that a failed furnace or an empty month does not force a sale or new debt.

How to Qualify for a Mortgage on an Investment Property

You qualify on your income, your debts and part of the property's rent, and the lender tests the payment at a higher rate than you will pay: the greater of 5.25% or your contract rate plus 2 percentage points. At a 4.5% rate, a $480,000 mortgage over 25 years costs about $2,657 a month, but you must qualify at 6.5%, where the payment is about $3,215.

Lenders do not count the full rent. Some add a share of it to your income, others subtract it from the property's costs, and CMHC itself treats homes you live in and rentals you do not differently. Your own income usually has to carry part of the new mortgage, on top of any mortgage on your home. For CMHC-insured mortgages, housing costs must stay within 39% of gross income and all debt payments within 44%.

Because lenders differ, talk to a mortgage broker who works with investors before you make offers. See financing an investment property, the mortgage stress test guide and the stress test calculator.

Closing Costs and Other Costs Beyond the Price

On top of the down payment you pay land transfer tax, legal fees, an inspection, title insurance and adjustments for any property tax or condo fees the seller prepaid. Work out land transfer tax first: it is charged on the full price.

In Ontario, the provincial tax on a $600,000 home is $8,475 (0.5% on the first $55,000, 1% up to $250,000, 1.5% up to $400,000 and 2% above that). Toronto adds a municipal land transfer tax at the same rates up to $3,000,000, for $16,950 in total. On the $800,000 duplex, Ontario's tax is $12,475. First-time buyer refunds do not help an investor: Ontario's, worth up to $4,000, requires you to move in within nine months. For other provinces, see land transfer tax by province and the land transfer tax calculator; the closing costs guide and estimator cover the rest.

The rent then has to cover the running costs: property tax, landlord insurance, maintenance, condo fees, any utilities you include, a property manager if you hire one, and some vacancy at each change of tenant.

How Is Rental Income Taxed in Canada?

Rental income is taxed as ordinary income: you report the rent and expenses on Form T776, and the net amount is added to your other income and taxed at your marginal rate. A rental loss can be deducted from your other income if the expenses were incurred to earn income.

Deductible expenses include mortgage interest (not the principal), property taxes, insurance, repairs and maintenance, management fees, advertising, legal and accounting fees, utilities you pay and condo fees. Repairs that keep the property in its existing condition are deducted in the year you pay them; improvements that last for years, such as an addition, are capital expenses.

Capital cost allowance (CCA) deducts capital costs, including the building, over time. A rental building bought now usually falls in Class 1, at 4% a year on the declining balance; land is not depreciable. CCA is optional and cannot create or increase a rental loss. If you sell for more than the depreciated value, the CCA you claimed comes back into your income as recapture.

When you sell, the profit on a rental held as an investment is a capital gain, and 50% of it is taxable: a $100,000 gain adds $50,000 to your income. The proposed two-thirds inclusion rate was cancelled in March 2025. Under the residential property flipping rule, in force since January 1, 2023, a home or a right to buy one, such as a pre-construction contract, sold within 365 days is taxed in full as business income unless one of the life events the CRA lists applies. A property bought to resell for a profit is business income however long you hold it.

A rental gets no principal residence exemption, which covers only a home you, your spouse or partner, or your children live in. If you live in one unit of a duplex, you generally split the gain, and only your unit's share is exempt. See capital gains tax on investment properties and the capital gains tax calculator, and see an accountant who works with landlords before your first purchase: owning personally or through a corporation is costly to change later.

Provincial and City Rules That Change the Numbers

Tenancy law is provincial, and so are most of the taxes aimed at investors and empty homes.

Rent increase limits cap how fast the rent on a sitting tenant can grow, while your property tax, insurance and rate at renewal have no such cap. The limits for 2026:

See rent increase rules by province for the rest of the country and the rent increase calculator. Evictions and deposits are provincial rules too.

Foreign buyers. A federal ban on non-Canadians buying residential property runs until January 1, 2027, and as of September 2026 no extension had been announced. Ontario's Non-Resident Speculation Tax is 25% of the full price when a foreign national, foreign corporation or taxable trustee buys a home anywhere in the province (NRST calculator).

Empty homes. These taxes matter if a unit may sit empty between tenants, or if you plan to use it part of the year (vacant home tax calculator):

• B.C. Speculation and Vacancy Tax, in the province's taxable areas: for 2026, 1% of assessed value for Canadian citizens and permanent residents who are not untaxed worldwide earners, and 3% for foreign owners and untaxed worldwide earners, rising to 4% in 2027. A principal residence, or a home rented for at least six months of the year in rentals of a month or more, can be exempt.
• Toronto Vacant Home Tax: 3% of assessed value on a home vacant for six months or more in the year. Written tenancies of at least 30 days, totalling six months, count as occupied, and every owner must declare the home's status each year or it is deemed vacant.
• Vancouver Empty Homes Tax: 3% of assessed value, unless the home is rented for at least six months of the year in periods of 30 or more consecutive days, or another exemption applies.
• Federal Underused Housing Tax: eliminated from the 2025 calendar year onward.

Quick resales. B.C.'s home flipping tax, in force since January 1, 2025, takes 20% of the net taxable income on a property or presale contract sold within 365 days of buying it, falling gradually to nothing at 730 days. If you plan short-term rentals, check the local rules first (short-term vs long-term rentals).

How to Run the Numbers on a Rental Property

Before an offer, work out the monthly cash flow after every cost including the mortgage, and the cap rate: the property's net income before financing as a share of its price. Use the rent the unit would get now and the actual tax bill, not the listing's projections.

Example: a $600,000 townhouse renting for $3,000 a month, bought with 20% down, with the tenant paying utilities. The mortgage rate is an assumption, not a quote.

The cap rate is 4.25% ($25,500 divided by $600,000), and the property loses $532 a month. It would need about $3,560 in rent to break even.

• When the mortgage rate is above the cap rate, borrowing makes cash flow worse: each borrowed dollar costs 4.5% and earns 4.25%.
• Cash flow is not taxable income. Only interest is deductible: in the first year about $21,180 of the $31,880 is interest and $10,700 is principal, so if the year goes as budgeted the property reports about $4,300 of rental income before CCA while costing you $6,380. The principal builds equity, which you get back only when you sell or refinance.
• Test the bad cases. At a rate 2 points higher at renewal, the payment on the balance left after five years (about $421,400) rises to about $3,121 a month over the remaining 20 years. Run it again with a vacant month, a big repair and $200 less rent.

Positive cash flow from the start usually takes a lower price relative to the rent, a bigger down payment or a unit you live in. Accepting negative cash flow is a bet that prices will rise; the table in the next section shows how they moved over the past year. Use the rental property cash flow calculator and the cap rate calculator, and see our guides to rental property cash flow, cap rates and investment risks.

Where to Invest in Real Estate in Canada: Comparing Markets

Choose a market where you can manage the property, or pay someone who can, and where the rent covers most of the costs at current prices. Price levels, their direction and the balance between buyers and sellers differ from city to city.

The table shows the latest month (the latest quarter for Gatineau) of each of our 14 market reports: the average price and the number of sales, each compared with the same month a year earlier, and market conditions. Conditions come from the sales-to-new-listings ratio: below 40% is a buyer's market, above 60% a seller's market, and in between is balanced. Greater Vancouver's board measures sales against active listings instead, with a buyer's market below 12% and a seller's market above 20%. n/a means the report lacks the figures to work it out.

Each market name links to its full report, and all of them are on the housing market reports page.

Check rents and vacancy as well: CMHC publishes vacancy rates and average rents for major centres in its yearly Rental Market Report. See also the best areas for real estate investors and the city affordability compare tool.

Who to Talk to Before You Buy

Line up four people before your first offer: an accountant who works with landlords, a real estate lawyer for the closing, a mortgage broker who works with investors, and a home inspector to find the repairs before they are yours. If the property is out of town, put a property manager's fee into your numbers from the start.

Growing Beyond Your First Property

Most investors buy a second property with equity from the first, through a refinance or a home equity line of credit, once the first has a record of steady rent. Every new mortgage is qualified against all your debts, including the earlier ones. Our guide to building a real estate portfolio covers the financing and timing, and the BRRRR strategy guide explains one way to reuse the same capital.