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Is Buying a Rental Property in Canada A Sound Investment?

Is Buying a Rental Property in Canada A Sound Investment?

posted in Mortgage News

If you’re considering purchasing a property in Canada for rental purposes, you might be wondering whether it’s the smartest way to spend your money. While there are some very distinct advantages associated with buying to rent, it doesn’t come without its own risks.

Below we look at the pros and cons of buying a Canadian property for the rental market:

Advantages of buying a Canadian property to rent

  • You get a regular, monthly income

    Buying a property to rent it out (provided you buy the right kind of property that will attract tenants, and advertise it at the right price) can guarantee you a regular income. This can be on top of your existing income, or as your sole income during retirement.

  • Your property will still grow in value

    Even if you buy a property and then decide not to rent it out, or can’t find any suitable tenants, your property will still grow in value should you decide to sell it on.

  • You’ll pay less taxes

    Being a landlord fortunately gives you the right to pay less in taxes, and this is because some expenses associated with the property, such as property taxes, insurance, management fees, maintenance costs and mortgage interest can all be deducted from your rental income.

Disadvantages of buying a Canadian property to rent

  • Financial commitments

    While ultimately, a lot will depend on your own financial circumstances, you may need to factor in at least US$25,000 to even get your foot on the property ladder in Canada. Then there are the thousands of dollars you may need to set aside in case of any unforeseen problems with the property or tenants.

    Also keep in mind that you’ll need to make a payment of approximately 20-35% of the total cost of the property upfront, as well as a 90-day verification period on the source of funds. Talking to a financial advisor and/or mortgage broker is the best way to get a good understanding of whether you can afford to buy a property to rent.

  • There may be liquidity concerns

    If you need to sell your rental property for any reason, you may struggle to do so depending on market conditions and a number of other factors.

  • Factor in management costs

    Whether you live at the other end of the country, next door or even on the other side of the world, managing a rental property can be a huge headache, and most landlords choose to work with a professional property management firm. While this is undoubtedly beneficial, it of course costs money.

It may be that the time is right for you to buy a property in Canada for the rental market, and that you go on to reap the many rewards of doing so. Or, it may not be the best time to be doing so, and you could go on to lose a lot of money. Before making any final decisions, be sure to talk to a mortgage broker about what you can and can’t afford in your chosen area, and to real estate professionals about the current state of the rental market and what types of properties are available within your budget.


Mortgage News

08 dFeb, 2022

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