Before you start browsing realtor.ca or calculating how much rental income you’ll be taking in every month, take a moment and think about what kind of investor you want to be, because you have several options. Are you looking for passive income through long-term rentals? Do you want to renovate and flip properties? Are you open to pre-construction projects, or do you prefer resale homes in established areas?

Knowing your goals early will drive most of your investment decisions and the types of properties you’ll be looking for. For most first-time investors in Ontario, starting with a single rental unit, like a condo or basement apartment, is the easiest way to get your feet wet.

Unlike buying a resale home to live in, investment properties often require a larger down payment than a primary residence. In Ontario, if the property is not owner-occupied, you’ll typically need at least 20% down. For example, buying a $700,000 property means you’ll need $140,000 in down payment, plus additional closing costs.

Compared to buying a property where you and your family will call home, mortgage qualification rules are also stricter for investment properties. Lenders may include a portion of the rental income in your application, provided you have proper paperwork showing that income.

Make sure to speak to a mortgage broker or lender who works regularly with real estate investors. You’ll want a clear understanding of your borrowing power and how your future cash flow will be assessed.

Cash flow refers to the amount of money your property generates each month. Appreciation is how much your property’s value will grow over the time you own it.

Ontario’s housing market has a history of aggressive price appreciation, and it’s only been in the last several years that we’ve seen a price correction due to global market conditions. But you don’t want to count just on price appreciation as a reliable strategy for a first-time investor. Many homebuyers who bought a property during the peak in 2021 – 2022 are still waiting for prices to recover from sharp losses.

This means you’ll also want to consider how much cash flow a potential property brings you. You want your property to carry itself financially, even if prices stay flat.

Look for opportunities where the rental income covers the mortgage, property tax, insurance, maintenance, and a small buffer for vacancies. This is your break-even point. Ideally, you want to go beyond that and have a positive cash flow every month.

Here’s a quick example to show you simple numbers:

• Purchase price: $700,000
  
• Down payment: $140,000
  
• Mortgage: $560,000 at 4.3% fixed for 25 years = approx. $3,036/month
  
• Property tax: $350/month
  
• Insurance and maintenance: $150/month
  
• Total monthly costs: $3,536
  
• If your property rents for $3,200/month, your cash flow is $336/month- Negative.
• Also note that out of your monthly mortgage installment of $3,536.00 an average amount of $1,167.00 goes into your Equity as principal payment – so that is also your money or your saving – increasing your equity every month.

Even a little bit of positive cash flow can make a big difference when you factor in long-term mortgage paydown and equity growth. That’s why it’s important to carefully go over the numbers before making any purchase. 

As your agents we will prepare a complete Rental Analysis and Carrying cost analysis using a spreadsheet for understanding calculations better and what is your projected  income after 5 years.

Many first-time investors start with a condo or a legal basement apartment because they’re easier to manage and maintain. Multiplexes with multiple units or mixed-use commercial buildings may have higher potential returns, but they also come with more complexity, costs, and risk.

If this is your first investment property, we recommend you pick something that you feel confident managing. You can always scale up later when you gain more experience, expertise, and confidence.

Not every property in Ontario can legally be rented out as a duplex or triplex. Different municipalities have different zoning rules, bylaws, and occupancy limits. Some areas require a secondary unit registration or rental licensing. Others restrict short-term rentals entirely.

Never assume a basement apartment is legal just because it has a kitchen. And never count on information in a real estate listing to be true or accurate. As a buyer, it’s crucial to verify zoning, permits, and compliance, no matter what is being advertised by the seller or the listing agent.

This is where working with an experienced real estate team becomes important. At RE/MAX Team Paliwal, we routinely verify legal status and guide clients toward properties that are both legal and income-ready. We help you minimize the risk of buying a property that could become a financial disaster.

In addition to your down payment, you’ll need money set aside for closing costs, which typically range from 1.5% to 4% of the purchase price. This includes:

• Land transfer tax (this will be double if you’re buying in the City of Toronto)
  
• Legal fees
  
• Title insurance
  
• Inspection costs
  
• Any lender fees or appraisals
  

You should also have funds set aside for repairs and tenant-ready improvements, even if the property looks move-in ready. A fresh coat of paint, new appliances, or minor repairs can make a big difference in how much you can rent the property for.

Ontario has very specific rental laws under the Residential Tenancies Act, and first-time landlords are often surprised by how complicated and rigid they are. Once you rent out your property, you are bound by the rules set by the Ontario Landlord and Tenant Board.

For example:

• You cannot evict a tenant just because you want to raise rent or sell
  
• You must follow strict notice procedures for entry, rent increases, and termination
  
• You are responsible for maintaining the unit, even if the tenant caused minor damage
  

We strongly advise all real estate investors to learn the rules to avoid expensive mistakes or legal disputes later. You will find countless landlord and tenant nightmare stories in the news, and you don’t want to be one of them. There are many excellent resources available, and RE/MAX Team Paliwal can provide the right ones if needed.

Your success as a landlord depends heavily on the tenants you accept in your property. It’s very important to take your time screening every applicant. Look for steady and healthy income, a good credit history, and positive references. You’ll want to use a detailed rental application and perform background checks. It’s better to take the time upfront to vet potential applicants so you don’t let in a bad tenant.

Once you’ve found a suitable tenant, your lease must be in writing and done on the Ontario Standard Lease Agreement. Include a detailed move-in inspection report and document everything, including communication. It protects both you and your tenant. Read the guide on how to use the document thoroughly and follow the directions carefully.

Despite what you might hear from other investors or see on TV, real estate investing in Ontario won’t make you rich overnight. Markets shift, interest rates fluctuate, and new laws are enacted that impact consumer sentiment. But over time, real estate goes up over 5-10 year periods and investors can build wealth over time.

This happens by paying down your mortgage, collecting rental income, and having your property’s value grow over time. The key is to buy the right properties, manage carefully, and keep your costs under control.

If your first investment goes well, it sets the foundation for future growth. You’ll be able to use equity from your first property to fund the second.

There’s a lot of noise out there when it comes to real estate investing. You’ll hear opinions from YouTube, friends, podcasts, and Instagram. But nothing replaces local experience and professional advice.

Work with a REALTOR who understands real estate investing and can help you:

• Run the cash flow numbers
  
• Understand market rents
  
• Identify areas with strong tenant demand
  
• Avoid legal or compliance issues
  

At RE/MAX Team Paliwal, we’ve helped many first-time investors buy their first property with clarity and confidence. We can walk you through the process step by step and help you find investment properties that match your goals and budget.

If you’re thinking about investing in your first property in Ontario, don’t try to figure it all out on your own.

Reach out to RE/MAX Team Paliwal for a no-pressure consultation. We’ll take the time to understand your goals and explain your options.