How much do you need to buy a rental in Canada?

The down payment is the biggest piece

On a rental you do not live in, plan for at least 20 percent down with a conventional mortgage. On a $500,000 property that is $100,000. The lender wants that cushion because an uninsured rental carries more risk for them. Some investors find this is the wall they hit first. As one beginner put it, it feels very difficult to raise enough capital to get into the market. Knowing the real down payment up front tells you which price range you can actually shop in.

Closing costs are not optional

The down payment is not the whole cheque. Closing costs run roughly 1.5 to four percent of the price, depending on the province and the land transfer tax. They include legal fees, the land transfer tax, title insurance, and an inspection. On a $500,000 property that is another $7,500 to $20,000. Investors who forget closing costs end up short at the worst possible moment. Build them into your number from the start.

Keep a reserve, always

Owning a rental means something will break, often in the first year. A furnace, a roof, a turnover between tenants. Keep a reserve so a normal repair does not become a crisis. A few months of expenses set aside is a common rule. Negative cash flow is never the goal, and an empty reserve turns one bad month into a real problem. The reserve is part of the cash you need, even though it does not go to the seller.

How a CMHC path changes the number

If you live in one of the units, a CMHC-insured path can lower the down payment a lot, which is how many investors get their first multi-unit. The trade is the premium. CMHC insurance can add over $10,000 to the deal up front, and the rules are stricter. So the CMHC path lowers the down payment but raises another cost. Whether it leaves you needing more or less cash overall depends on the specific deal, which is why you run both paths before you decide.

Add it up: your real cash-to-close

• Down payment. At least 20 percent conventional, or less on an owner-occupied CMHC path.
• Closing costs. Roughly 1.5 to four percent for land transfer tax, legal, and inspection.
• Repair reserve. A few months of expenses set aside for the first year.
• Upfront renovation. Any work the property needs before a tenant moves in.
• CMHC premium. On an insured path, added to your costs.

Add these together and you have your real cash-to-close, not just the down payment the listing makes you think about.

Match the number to deals that work

Once you know your real cash-to-close, you can shop with discipline. A property that needs more than you have is not your deal yet, no matter how good it looks. And the cash to get in is only half the question. The other half is whether the deal cash flows once you own it. A property you can afford to buy but cannot afford to hold is still a mistake. Run the full numbers on each candidate so the cash to get in and the cash flow after both work.

Questions investors ask

How much down payment do I need for a rental in Canada?

For a rental you do not live in, plan for at least 20 percent down on a conventional mortgage. On a $500,000 property that is $100,000. If you live in one of the units, a CMHC-insured path can lower the down payment, though it adds a premium.

What other costs are there beyond the down payment?

Closing costs of roughly 1.5 to four percent including land transfer tax and legal fees, a repair reserve for the first year, and any upfront renovation. On a CMHC path, add the insurance premium, which can be over $10,000. Budget for all of it, not just the down payment.

Can I buy a rental with less than 20 percent down?

Sometimes, on an owner-occupied path where you live in one unit and rent the others, a CMHC-insured mortgage can allow a lower down payment. A pure investment property you do not live in generally needs at least 20 percent down on a conventional mortgage.