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How to buy an investment property as a first-time home buyer in Canada
QUICK TAKEAWAYS
- Buying an investment property in Canada in 2025 requires a minimum 25% down payment for non-owner-occupied properties.
- First-time buyer programs like FHSA and HBP cannot be used for investment properties intended for rental purposes.
- Mortgage rates for investment properties are higher, often exceeding 7% with alternative lenders.
- Landlords face responsibilities like maintenance, legal compliance, and managing tenant risks.
This article has been updated from a previous version.
Buying an investment property in Canada as a first-time home buyer can be a smart way to build wealth, but in 2025, the rules have changed.
Higher down payment requirements, stricter mortgage qualifications, and upcoming tax changes mean you need a clear strategy before diving in.
Here’s what you need to know when it comes to financial requirements, mortgage options, government programs and landlord responsibilities, so you can make informed decisions in today’s market.
Investment property vs. Primary residence
An investment property is purchased with the primary purpose of generating income and building wealth. These properties are not intended for the owner's personal use, but rather for renting out or selling for profit. On the other hand, a primary or principal residence is the main home where you or your family lives.
An investment property can take the form of cottages, condos, single-family homes, duplexes, and multi-unit buildings. With duplexes and multi-unit buildings, you have the option to live in one unit while renting the other(s).
Can you use the FHSA or HBP for an investment property?
Not if you plan to rent it out. Canada’s first-time buyer incentives — the First Home Savings Account (FHSA) and the Home Buyers’ Plan (HBP) — are strictly for homes you intend to live in.
To withdraw funds from an FHSA, you must occupy the property as your principal residence within a year of purchase or construction. That means these programs can’t be used to finance an investment property.
Financial requirements and mortgage options for investment properties in Canada
Before you start shopping, review your financial health. Most lenders expect a credit score of at least 680, and a debt-to-income ratio under 44%.
Down payment requirements have tightened: for non-owner investment properties, you’ll need 25% — $250,000 on a $1 million home — plus closing costs and reserves. If you plan to live in one unit of a duplex or triplex, down payments can start as low as 5% for homes under $500,000, scaling up for higher-priced properties.
Once you know what you can afford, explore your financing options. Traditional mortgages for owner-occupied properties offer lower rates and smaller down payments.
Pure investment loans are stricter: Lenders require 25%, strong credit, and apply stress tests. Rates are higher — often above 7% with alternative lenders — while big banks offer insured rental loans in the 4.24 to 4.99% range. Some investors turn to partnerships or private lending, known as “Other People’s Money,” to boost buying power, but shared profits and risk come with the territory.
Knowing what you can afford and what lenders expect will help you set realistic goals and narrow your search to properties that fit your financial picture.
Related: The hidden costs of buying a home
Responsibilities of an investment property owner
While the idea of being a landlord may be tempting, there can be big risks and responsibilities involved. Some of these include:
- Market fluctuations: Property values can rise or fall with economic trends.
- Vacancy risk: Budget for periods without rental income.
- Maintenance & depreciation: Properties require upkeep and can lose value over time.
- Interest rate changes: Higher rates increase mortgage costs — especially relevant in 2025 as rates remain elevated.
- Legal issues: Tenant disputes, evictions, and compliance with provincial laws. Ontario’s Bill 60, introduced in 2025, speeds up eviction timelines and changes compensation rules for personal-use evictions.
- Insurance: Landlord-specific coverage is essential.
Purchasing an investment property in Canada in 2025 isn’t as simple as it once was. With minimum down payments now at 25% and tougher lending criteria preparation is key.
While programs like FHSA and HBP won’t apply to rental properties, strategic financing and careful budgeting can make this a profitable move.
Related: Mortgage amortization: Should you go long or short?
Do your market research before selecting your location for your investment property
Canada’s real estate market remains diverse in 2025, with property values and rental demand varying widely across provinces and cities. Investors continue to look for regions with strong rental markets, steady population and job growth, potential for property appreciation, and other positive economic indicators.
Key factors include property prices, neighbourhood amenities and infrastructure, crime and safety rates, revitalization programs and local government investments, and school ratings.
According to CMHC, Toronto, Calgary, Ottawa, and Halifax are strong markets for rental investment in 2025, with Calgary and Edmonton offering some of the best rental yields thanks to affordability and economic growth.
Working with a local real estate agent and reviewing detailed neighbourhood data on property listings are still essential steps to assess local property values and demand.
Strategizing your investment: long-term buys or short-term flips
Two main strategies dominate real estate investing: long-term buy-and-hold and short-term flips.
- Long-term investors benefit from rental income and compounding returns over time, with fewer transaction costs and less stress from market fluctuations.
- Short-term flippers aim for quick profits by reselling properties at higher prices, but this approach requires timing, market insight, and tolerance for risk.
Important 2025 update:
- The Residential Property Flipping Rule (introduced in 2023) still applies: properties sold within 12 months are taxed as business income, not capital gains.
- In 2024, the federal government increased the capital gains inclusion rate from 50% to 66.7% for gains over $250,000 and for corporations.
- The Underused Housing Tax (1% annual tax on vacant or underused properties) applied through 2024 but was phased out in 2025.
Legal and tax considerations
The exact legal requirements of renting out an investment property vary based on local laws and regulations. Generally, the following documents are commonly used:
- Lease (or rental) agreements
- Tenant application forms
- Tenant screening forms
- Move-in/move-out inspection checklist
- Security deposit receipts
- Insurance documents
Landlords are also required to meet various minimum property standards, based on local regulations. As the owner of the property, you’re also required to pay any property taxes due to the local agency.
There are certain tax benefits for real estate investors. For example, the cost of repairs and maintenance on a rental property can often be deducted from rental income, reducing the amount of income tax owed. Additionally, if you sell an investment property for more than you paid for it, you may be able to offset the capital gains tax by deducting the cost of improvements made to the property.
Doing your due diligence and property inspection
Just like with a property you buy as your home, never underestimate the importance of a property inspection.
A professional inspector can assess the condition of the property, uncover any hidden issues, and provide a comprehensive report. This step will help you avoid unexpected expenses and ensure the property meets safety standards. Additionally, an appraisal and title search can help investors make informed decisions.
An appraisal helps investors understand the property's current market value, aids in setting an appropriate purchase price or negotiating terms, and is often required for securing financing from a lender.
A title search reveals any outstanding debts or claims against the property, helps identify potential legal issues that may affect ownership or use of the property, and provides assurance to buyers and lenders that the property has a clean title.
When visiting potential investment properties, keep an eye out for red flags that may indicate potential issues or challenges, such as:
- Structural issues:Cracks or foundation problems, uneven floors.
- Water damage:Stains or mould, musty odour.
- Roof condition:Visible damage including missing shingles or sagging.
- Pest infestation:Droppings or nesting material, wood damage.
- Electrical issues:Outdated wiring, flickering lights.
- Plumbing problems:Water stains or leaks, water pressure issues.
- HVAC concerns:Old or inefficient system, strange noises.
- Environmental issues:Proximity to hazardous sites, flood zones.
- Legal or zoning issues:Unresolved code violations, zoning restrictions.
As part of the investment property buying process, you’ll be working with your real estate agent, a home inspector, and lawyers. Always partner with experienced and reputable professionals to ensure accuracy and reliability to help you navigate your first investment purchase in Canada.
Read next: How to own real estate via the stock market if you don’t want to be a landlord
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Engaging a mortgage broker before renewing can help you make a better decision. Mortgage brokers are an excellent source of information for deals specific to your area, contract terms, and their services require no out-of-pocket fees if you are well qualified.
Here at Rates.ca, we compare rates from the best Canadian mortgage brokers, major banks and dozens of smaller competitors.
Caitlin McCormack, Freelance writer
Caitlin McCormack is a writer based in Toronto. Her work has appeared in MSN, Food Network, HuffPost, What to Expect, Today's Parent, and Mashable, among others. When she isn't writing, she's busy chasing after her two sons, testing out new recipes, and working on her century-old fixer-upper.
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