Buying an investment property is a popular option for Canadians looking at different ways to invest their money. Let’s explore how you could buy an investment property yourself.

Investment property mortgages

The first thing you need to consider is the number of units your building will have. Most buildings with 1-4 units are zoned residential, and the qualification criteria and financing options from lenders are only slightly more difficult than that of a mortgage similar to what you have on your principal residence.

If it’s a multi-unit property, the second thing to consider is if you, the owner, will be living in one of the units or not. If you will be occupying one of the units, the property would be considered owner-occupied. If all of the units will be rented out, your property would be considered non-owner occupied. The major difference between the two is how much of a down payment you need to make.

Owner-Occupied Investment Properties: (less than 20% down)

Investing in an owner-occupied property is an attractive option for Canadians seeking to grow their wealth or offset the cost on a monthly basis.

Here’s a breakdown of what you need to know when considering an investment property for owner occupancy.

Property Qualification:

Begin by assessing the number of units in your building. Most properties with 1-4 units fall under residential financing. 

Qualification criteria and financing options for owner-occupied investment properties are relatively similar to those for your primary residence.

Down Payment:

1 to 2 units: owner-occupied investment properties, a minimum down payment is required, typically 5% of the first $500,000 of the purchase price plus 10% of any amount exceeding $500,000. (for example: $700,000 purchase price = $45,000 min down payment) 

If buying a property with 3 to 4 units min down payment = 10% 

Additional Considerations:

  • Partial gifted down payment is permitted.
  • An appraisal is required.
  • You may be able to refinance rental properties, with a maximum loan-to-value ratio of up to 80%.

Amortization Period:

The maximum amortization period for owner-occupied investment properties is 25 years, regardless of the down payment amount.

Qualification Requirements:

To qualify for an investment property mortgage for owner-occupied properties, provide your lender with essential documents including:

  • The Agreement of Purchase and Sale
  • proof of down payment
  • proof of  income (such as a job letter, pay stubs, or Notice of Assessment for two years of T1 Generals for self-employed individuals)
  • proof of existing renters (if applicable)
  • Must be self contained units 

Non-Owner Occupied Investment Properties:

Ie: Conventional purchase

Investing in a non-owner occupied property requires a different set of considerations and financial requirements. 

Let’s explore what you need to know.

Property Qualification:

Similar to owner-occupied properties, assess the number of units in your building. Most 1-4 unit properties (self contained units)

Down Payment: minimum 20% down payment 

Additional Considerations:

  • NO gifted down payment 
  • An appraisal is required (ALWAYS) 
  • You may be able to refinance rental properties, with a maximum loan-to-value ratio of up to 80%.

Amortization Period:

The maximum amortization is 30 years.

Qualification Requirements:

To qualify for an investment property mortgage for NON owner-occupied properties, provide your lender with essential documents including:

  • The Agreement of Purchase and Sale
  • proof of down payment
  • proof of  income (such as a job letter, pay stubs, or Notice of Assessment for two years of T1 Generals for self-employed individuals)
  • proof of existing enteral income or potential rental income (market rents) 
  • Must be self contained units 

There are options/lenders for those buying a rental under a hold co.