• After a strong rise in real estate prices in 2021 and in early 2022, many markets are now seeing weakening home prices. Current rental property owners, as well as new potential investors looking to buy, may be wondering how to determine if a rental property is a good strategy for them.

    If you are thinking about becoming a landlord, you need to consider not only the purchase price and mortgage repayment costs of your property, but other financial considerations as well.

    How much does it cost to buy a rental property?

    When purchasing a rental property, the typical down payment requirement is 20% of the purchase price. If the owner is going to occupy one of the units in a multi-unit property, there is a lower minimum.

    For one- or two-unit properties, a buyer needs only 5% of the purchase price and can borrow the other 95%. However, if the property is worth more than $500,000, the minimum down payment is 5% on the first $500,000 plus 10% of the excess. A three- or four-unit rental property that will be owner-occupied has a minimum 10% down payment requirement.

    Buyers need to consider land transfer taxes and mortgage default insurance as part of their closing costs as well. All provinces—other than Alberta and Saskatchewan—charge land transfer tax to buyers; in Toronto, municipal land transfer tax is charged as well. Mortgage default insurance applies to mortgages that exceed 80% loan to home value. But some lenders may require insurance for a property you intend to rent out even if your down payment is more than 20%.

    Read the full article on Money Sense >> 

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