How to Start Investing in Real Estate
First off, we have an important distinction to make about investing in Canadian real estate. Buying a home to live in should not necessarily be considered “investing.” You are buying a necessity for living, called shelter, and while many will view it as a long-term investment, it is not the kind of investing we are discussing.
Your home should appreciate over time, but it’s not a financial product you should expect immediate returns from, unless you are planning a quick flip (more on that later).
Here’s a look at the kind of real estate investments we are going to discuss:
Rental properties – Buying a property for the intention of renting it out to a tenant, long-term or short-term. This can be a section of your home, like a basement, or a completely different residence.
REIT – Real estate investment trusts (REITs) are investment vehicles that you can buy and sell like a stock and financially benefit without having to buy expensive real estate.
REIT ETFs– Exchange-traded funds (ETFs) are baskets of stocks that you can also buy and sell on a stock exchange. Some ETFs hold multiple REITs, offering an affordable way for beginners to invest in real estate.
Speculation/flipping – This is when you buy real estate with the sole intention of selling it for more than what you paid in a short timeframe. The sale will be subject to a capital gains tax.
Principal residence – This is when you buy a home as your primary residence and sell it many years later at a profit without paying capital gains tax.
How to Invest in Canadian Real Estate
One of the most common methods of real estate investing in Canada is to buy a property to generate rental income. It’s a growing trend in Canada’s urban centres. A Royal LePage report pegged the number of Canadians who own a second home at more than 10%.
Some of those could be recreational properties, like cottages and cabins, but the majority are for rental purposes. In fact, more than two-thirds of survey respondents in Greater Vancouver and Greater Toronto reported collecting rental income. The survey also found that young homeowners were capitalizing on rental income, with 18% of homeowners aged 18 to 35 owning more than one property.
Buying a rental property is much easier when you already own a property. You can use the equity in your principal residence to finance the purchase of a rental property. For example, someone who owns in the Greater Toronto Area might use their home’s equity to buy a more affordable condo in a small town like Guelph or London (Ontario), where a high percentage of students need rentals.
If you don’t already own a property, and you are renting, then investing in a rental property where you live is inadvisable. You should secure a home for yourself first and foremost. However, if real estate prices in your region are cost-prohibitive, then it’s worth looking into a rental property in a smaller, less expensive market where you don’t necessarily plan to live in the near term.
Here’s another example: if you live in Vancouver, where the average cost of a condo was $802,591 in 2021, buying real estate might be unaffordable, to put it mildly. However, you could invest in a rental property in a smaller BC city, such as nearby Nanaimo, where the average price for all residential properties was $470,738 in 2021.
Good Canadian Real Estate Investments
Ask a real estate agent what they consider a good Canadian real estate investment, and they will tell you there’s no wrong answer. Yes, it’s true that, since the financial crash in 2008, the price trajectory of real estate in Canada has been mostly uninterrupted, rising steadily. Even the calamitous subprime mortgage crisis in the United States, which sent global economies reeling, only moderately affected Canada’s real estate market. It’s why Canada’s real estate market is so often characterized as stable.
That said, there’s always a risk when investing in real estate in Canada or anywhere else. The real estate market is subject to volatility, just like the stock market, and home values can plunge quickly if something shocks the market.
Real Estate Investing for Beginners in Canada
Beginners who want to invest in real estate should understand the risk in trying to time the market perfectly. Because Canada has been on an upswing for many years and sent into overdrive during the pandemic, many believe the domestic real estate market is due for a correction, or worse, a crash.
How severe that will be, or if it happens at all, remains to be seen. The point is: what goes up must eventually come down, and a good real estate investment should be able to weather any storms that come to pass.
Another consideration for burgeoning real estate investors is the political climate around housing in Canada. Governments at every level are being pushed to address the growing affordability crisis in real estate across Canada. The skyrocketing prices have been a boon for established homeowners and real estate investors, but younger first-time buyers are being priced out of the market.
Governments are increasingly likely to get involved in the housing market, which could impact the kind of price growth we’ve seen in recent years. However, most government intervention so far has focused on increasing housing supply, which has yet to negatively affect the market.
Lastly, interest rates are no small piece of the real estate investing puzzle. The Bank of Canada sets what’s called an overnight rate. That rate guides banks, credit unions, and other financial organizations in what mortgage rates they offer. We’ve seen record-low mortgage rates over the past two years, but the Bank of Canada has recently signalled that big rate hikes could be in the cards this year and next.
Higher mortgage rates could significantly cool the real estate market. buyer demand. Those considering an investment property should take pause and consider the impact interest rate hikes might have in the near future.
Best Way to Invest in Real Estate
One of the best ways to invest in real estate without saving for a massive down payment is through a REIT (real estate investment trust). It’s one of the easiest ways to test the waters of real estate investing. REITs do the investing for you, purchasing large swaths of commercial (office buildings) and residential real estate, then renting it out to tenants.
It’s not uncommon for REITs to own malls, large apartment buildings, and big industrial sites, which you typically see on the outskirts of the city. So how do you make money? Here’s how it works:
- You can purchase a REIT on the Toronto Stock Exchange like any other stock. REITs have share prices, and you will need an investment account to buy them through either a bank or an online broker.
- REITs buy and manage commercial property and residential property, then collect income from their tenants.
- REITs do not pay any corporate income tax because they distribute all income to shareholders, or “unitholders” in the case of REIT, via dividends. You will need to pay capital gains tax on your REIT income unless you hold it in a registered account, such as a TFSA or RRSP.
- You make money in two ways. Through quarterly dividends and the increased share price of the REIT. The amount of the dividend will depend on the number of units you hold in the REIT. More units equal bigger dividends.
Here are some top REITs in Canada:
- Canadian Apartment Properties (symbol=CAR.UN) owns $10 billion worth of residential apartments.
- RioCan is a major REIT (symbol=REI.UN) that owns over $6 billion of Canada’s biggest retail spaces with tenants like Loblaws, Canadian Tire, Winners, and more.
- Granite Real Estate (symbol=GRT.UN) owns over $6 billion of commercial and industrial real estate with warehouses and logistics properties in its portfolio.
The unit price for REITs can range depending on their market performance and popularity, but most are in the affordable zone of around $20. This creates a low entry barrier for those looking to invest in real estate. It gives you a foothold in the market without the daunting prospect of saving for a big down payment and paying back a mortgage.REITs pay investors dividends. When choosing a REIT, look for a solid dividend yield. For example, if a stock has an annual dividend of $2 per share and trades at $20, the dividend yield is 10%, which is really good.
Passive Real Estate Investing
If buying, selling, and managing a portfolio of REITs or other kinds of real investments sounds like too much hassle, there’s another option for a less hands-on investing approach.
REIT exchange-traded funds (ETFs) are large baskets of REITs. Rather than go all in on one, you can spread out your investment across many REITs. It diversifies your portfolio with multiple types of real estate properties – commercial, residential, office, retail, and more – and protects you against the risk of one or two suffering REITs.
REIT ETFs are considered passive investments because you don’t need to manage them or have much involvement. ETFs, which you can buy and sell on the Toronto Stock Exchange, are managed for you, plus they are generally very affordable, especially compared to buying actual real estate in Canada.
Here are three popular REIT ETFs:
- CI First Asset Canadian REIT ETF (symbol=RIT) owns mostly residential and commercial real estate, including top-performing REITs like Canadian Apartment Rentals, Granite, and Dream Industrial.
- BMO Equal Weight REITs Index ETF (symbol: ZRE) has been around for 10 years and is composed mostly of residential and retail REITs, including Granite and Boardwalk.
- IShares S&P TSX Capped REIT INDEX ETF (symbol=XRE) is managed by a global investment firm called BlackRock. Retail and residential REITs make up the bulk of the fund, including RioCan and Allied Properties.
To get started investing in REIT ETFs, you will need to open an investing account with either a bank or an online broker. You can do it yourself online in a few minutes, or call a bank associate for help. It should be noted that ETFs charge management fees, typically a small percentage of the fund’s average assets under management.
How Much Can Real Estate Investors Make in Canada?
For something that involves such large sums of money, real estate investing doesn’t require a huge amount of knowledge. In fact, you can do some napkin math to quickly see if the investment is feasible.
Let’s say you have $50,000 to invest and want to buy a condo to rent out. Looking for a property in downtown Vancouver or Toronto will be especially challenging due to the price. Better to scour markets in the deep suburbs or smaller cities and hopefully find a property for around $250,000.
With a 20% down payment ($50,000), you can purchase the property without needing CMHC insurance, which will add to your overall mortgage.
- Purchase price: $250,000
- 20% down payment: $50,000
- Estimated monthly payments: $1,051 (based on 3.99% interest rate with 25-year amortization)
- Maintenance fees: $300
- Monthly property taxes: $100
- Monthly Insurance: $60
- Your monthly carry costs: $1,511
The next step in your research is getting a feel for market rental rates where you are buying the property. Can you rent out a one-bedroom for $1,750? According to national rental stats, there’s a long list of cities and towns where you can command that rental price or higher.
In this scenario, a $1,750 rent will net you an annual rental income of $21,000. Minus your expenses and mortgage payments, you are left with $2,868 annually ($ 21,000- $18,132 = $2,868). That works out to a 5.7% annual return on your $50,000 down payment investment.
Of course, being a property manager is more than just collecting rent cheques. As a landlord, you are responsible for maintaining the unit, and any emergency plumbing problem will be your financial responsibility. That could cut into your profits or even leave you in the red at year-end. On the bright side, you will be gaining equity and an appreciating asset, plus there are various tax deductions that can benefit you.
Best Places to Invest in Real Estate in Canada
With prices in Canadian real estate rising sharply in recent years, the question of “where should I invest in real estate?” has become “where can I afford to invest in real estate?” Major cities like Vancouver and Toronto are no longer financially feasible for most, but Canada’s midsize cities still present opportunities.
Here are 5 cities that still offer real estate affordability:
Edmonton
Alberta’s capital is full of lush ravines, summer festivals, and dynastic NHL hockey. It also has an average home price of $364,400, which is less than half the national average ($796,068).
Saskatoon
Saskatchewan’s largest city is a significant economic and cultural presence in the prairie province. The average home price of $334,100 is even lower than Edmonton’s.
Winnipeg
Despite its infamous winters, the Peg is rich in history, culture, sports, and general livability. People are discovering Winnipeg. Case in point: the average home price ($348,900) jumped 14% year over year.
Halifax
The beautiful seaside city of Halifax has witnessed enormous price acceleration. The average home went from $359,900 in 2021 to $493,200! However, it’s still well below the national average.
Calgary
At the foot of the beautiful Rockies, Calgary offers amenities, post-secondary institutions, new transit, and a thriving economy. Its average price of $503,400 remains affordable for investors looking to plant roots or generate rental income.
How to Invest in Real Estate with No Money in Canada
It can be tough to sit on the sidelines and watch others benefit from a high-performing real estate market. If your bank account does not reflect hefty capital to burn, there are options for investing in real estate without money.
Rent-to-own – A rent-to-own scheme is similar to leasing a car: a portion of your rental payments, called rent credits, is applied toward the purchase price. You can decide to buy at the end of the lease or agree to buy at the start of the lease, locking in a price in case it appreciates significantly. There are a few companies in Canada that facilitate these arrangements.
REITs – We discussed at length how REITs can give you entry into the real estate market without having to buy a property. If you don’t have money, you can apply for a personal loan to get started investing in these tradable shares. A loan allows you to build credit, too, while enjoying the dividends and potential price growth of the REIT.
Can Foreigners Invest in Property in Canada?
Foreign investment in real estate is a hot-button topic in Canada, especially in cities like Vancouver and Toronto. Many have pointed the finger at foreign investors in Canadian real estate as the culprit for skyrocketing home prices. The debate has even spread to a national concern, with the federal government planning a 2-year ban on foreign buyers.
In the meantime, it is still perfectly legal to buy property in Canada, regardless of your nationality. But deterrents are popping up in the form of provincial taxes. Ontario, for example, now charges a 20% foreign buyer tax on real estate purchases in the province. BC is the only other province with such a tax; it also charges 20% on foreign buyer purchases.
Is Flipping Houses Profitable in Canada?
Unless you’re one of those clever home improvement types with plenty of money to spend on renovations, house flipping is not a recommended racket for real estate beginners. Those who profit from flipping houses can usually buy a home, invest significantly in renovating, and sell it within a short time frame. Yes, it can be quite lucrative in a strong market, but it takes plenty of experience and capital.
Others will buy a property, do nothing with it, and sell it a year or so later for a profit – that’s also considered house flipping. But that’s a risky move because you’re banking solely on price growth and a continuously surging market. Also, you will have to pay capital gains tax on the sale, unless you declare it as your principal residence – the place where you live – and that’s usually not the case.
BRRRR Strategy Explained for Canadian Investors
The BRRR Strategy, also known as Buy, Renovate, Rent, Refinance, and Repeat, is a pretty popular strategy for Canadian investors. The idea behind this strategy is to build wealth by recycling your capital. You acquire property, renovate it to add value, find a renter, and then refinance it. With your new appraisal amount, you should be able to access some capital to get another property and start the process over again.
Depending on how many real estate assets you have, you may want to have a property management company manage the rentals of your property investments. However, you will need to factor in property management fees, which can range depending on who you use.
The Smith Manoeuvre: Making Mortgage Interest Tax-Deductible
The Smith Manoeuvre is a popular strategy in Canadian real estate investing. This financial strategy legally converts your non-deductible mortgage interest into a tax-deductible investment loan interest. How it works is that as you pay down your mortgage, you borrow against your home equity, then invest those funds and generate income. The interest on these funds then becomes tax-deductible, giving you an added tax benefit.
House Hacking Strategies That are Legal in Canada
House hacking is a common way to help offset the costs of home ownership. That said, to be legal, you have to comply with municipal zoning bylaws and building codes. All secondary suites must meet safety standards and be registered.
Some common forms of house hacking include:
Multi-Family Properties: This can be anything from a duplex to a fourplex, and you have to be living in one of the suites. The rest of the unit will be income-generating properties. Plus, as first-time home buyers and owner-occupants, you can purchase with as little as 5% down.
Legal Basement Suites: By purchasing a home with a legal suite, you can generate passive income without having to start buying rental properties.
Accessory Dwelling Units: This involved building or converting existing structures on your property into garden suites, coach houses, or even laneway houses. In places with strong rental demand, you can gain positive cash flow to help build your financial future.
Room Rentals: This is the simplest way to start earning potential rental income. You still live in your own home, but you rent out rooms to generate a steady income from residential tenants.
Short-Term Rentals: This is a great strategy as long as your municipalities bylaws allow it. You can use platforms to rent out your investment properties or rental units to earn some extra income.
CMHC MLI Select Program for Multi-Unit Investors
The CMHC MLI Select program is mortgage loan insurance designed for multi-unit residential investors. Some of the benefits of this program include:
- As little as 5% down
- Up to 50-year amortization periods
- Lower insurance premiums
This is strictly for new or existing rental units with 5 or more units.
Joint Venture Real Estate Partnerships in Canada
These are partnerships in which two or more parties combine capital, credit, or expertise to acquire, manage, or develop property. These are commonly made for commercial, residential, and large-scale residential properties. This allows the partners to leverage certain skills and increase their buying power. For some people, this is a great alternative to direct ownership.
Private Mortgage Investments and MICs Explained
Mortgage Investment Corporations often fund private mortgages in Canada. The corporations are funded by investor capital and offer high-yield, income-focused returns. They also allow real estate investors to gain exposure to real estate while building their investment portfolios. These are also secured loans, like traditional mortgages, so the risk tolerance is lower than for other investments due to the tangible assets that can be seized.
Short-Term Rental Rules in Major Canadian Cities
Before you start your real estate investment journey, it’s important to know what you’re able to do and what you aren’t. If you’re looking to rent short-term, this is even more important. Here’s what these rules look like in major Canadian cities.
Vancouver: All short-term rentals must be in your principal residence; a business license is required, and all rentals must be for less than 90 days.
Toronto: The person renting must be the principal resident, and the rooms or the entire home can be rented for no more than 28 days at a time.
Montreal: Short-term rentals are only available in designated zones, and a permit from Tourism Quebec is required.
The Difference Between Cap-Rate and Cash-on-Cash Returns
While cap rate and cash-on-cash returns are both worth considering, they serve different purposes. The cap rate is used to compare properties in the same market to determine if the price is fair based on income. Cash-on-cash is used to determine if the deal meets your personal income goals and to compare financing options.
Pros and Cons of Pre-Construction Condos
When it comes to property investment, pre-sale condo assignments can be a good way to build equity, but they can also have downsides. Some things you need to consider are property value, tax implications, and how it affects your long-term wealth. Here’s a list of some of the pros and cons.
| Pros | Cons |
| Lower initial deposits | Higher costs and fees with new build GST |
| Lower home values before prices increase | Construction delays and cancellations |
| Home customizations since it isn’t built yet | Uncertainty with financing |
| New construction warranties | Differences between marketing and the finished product |
| Modern amenities | Risk of market downturns before the unit is complete |
Another thing to consider is the tax implications. Like GST/HST, which is only paid on new builds, not on standard residential property sales. However, if you’re a first-time home buyer, you can use your first home savings account for the down payment tax-free, and you can qualify for the GST/HST tax rebate.
If you’re purchasing the unit as investment property, you need to consider the projected rental income and the fact that you will have to pay capital gains on any profits you make when you sell the property. However, when you do your annual income taxes, you can claim capital appreciation for a tax break, but it is best to get tax advice before you make any commitments.
Best Provinces for Rental Property Cash Flow in 2026
Right now, the best provinces for rental property cash flow include Alberta, Saskatchewan, and Nova Scotia. This is because property prices are lower, but those paying rent pay a similar amount to those in other provinces. The fact that there are also low vacancy rates means you’re more likely to get renters. A real estate agent and a mortgage broker can help you find the right property to get started.
Holding Rental Properties Pervs. In a Corporation
Whether you hold rental properties personally or in a corporation, there are benefits to each. Those new to rentals or with a small portfolio can benefit more from holding these personally. In contrast, corporations are best for large portfolios because they can limit your liability and defer taxes.
