Buying a rental property is a good investment for your future and a way to generate monthly income. Before purchasing your first investment property, it’s necessary to be aware of what you’re getting yourself into and how you can best navigate any obstacles that lay ahead. Here are five tips for buying your first investment property.

1. Have a Financial Plan

You might be familiar with the process of getting a mortgage pre-approval for your primary residence. However, when seeking a mortgage for an investment property the process is a little more complicated. Canadian banks treat investment property mortgages as ‘higher risk’ so qualifying can be more difficult. They consider your regular income as well as a very conservative amount of rental income to determine if you qualify for both your primary home and your new investment property. Credit, down payment, and income are still critical factors in qualifying but now also are the number of units and the market rents. The right broker will examine your situation and determine your best path forward to purchasing your investment property and getting approved by the banks!

2. Don’t Try and Get Rich Quick with Your First Investment Property

If you are a first-time investment property purchaser then you will be dealing with enough stress without dealing with renovations. Unless you are a professional or have the funds to pay someone that is, it may be better that you avoid purchasing a fixer-upper for your first investment. If you do decide to buy a flip, make sure you have a sound back up plan (ie can rent the property if market conditions or other surprises keep you from making big fast profits)

3. Resolve and Improve Your Debt Before You Purchase

If your goal is to buy an investment property and acquire a mortgage with a favourable interest rate, you will want to make sure you limit your debt exposure. Paying off credit card balances or small loans prior to purchasing can go a long way in what you can qualify for. Closing out credit accounts is NOT necessary but having funds available and no balances will also increase your credit score.

4. Look for a Low-Interest Mortgage Rate

One of the best ways to ensure you can turn a profit off your investment property is by finding a low-interest investment mortgage rate. Due to the pandemic and the general economic outlook interest rates are low, which makes this a great time to purchase an investment property if you meet the qualifying criteria. If you are curious about what your options are, contact a mortgage broker to help you find the best interest rates for your investment mortgage.

5. Think Ahead

Remember that real estate valuations tend to rise over time. You might face short-term turmoil at any given time. Many people experienced unexpected hardship in 2020. However, if you choose to view your rental property as a long-term investment, you will likely benefit from positive trends within the Ontario real estate market. Your rental property will increase in value over the long term. Proper planning and a sound strategy with your mortgage broker will be a huge benefit.

Purchasing your first investment property can be intimidating. A rental property is a smart long-term investment to make, but to properly determine your financial options, give me a call. I can answer any questions you may have and help you learn more about your lending options as well as find you the best investment mortgage rates. If you are ready to get started, our HW Advantage team can help guide you through the purchasing process from start to finish!


Give us a call at 905-541-6961 or fill out the form here to begin.