Will you make money on your rental property? + MORE Sep 8th

Variable-rate mortgage holders will see their interest costs rise once again starting on Thursday as prime rate rises to 5.45%.

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…

Canadian home prices are falling. Borrowing costs are increasing at an incredible rate. It’s the battle royale of home ownership affordability: Will wannabe home owners benefit from the real estate market correction, or will their dreams be crushed by the rising mortgage costs that are causing it? 

I believe that improved home ownership affordability is on the way, but that the “improvement” will likely be modest. To understand why, it helps to know how we got here and to consider what happens to the affordability equation as home prices go down and borrowing costs go up. 

Inflation (not rates) is the biggest concern for central banks

Since March 2022, the Bank of Canada (BoC) has been raising interest rates in an effort to tame runaway inflation.

In June, inflation in Canada reached a 39-year high of 8.1% year-over-year, after decades of mostly low, stable and predictable inflation. It eased to 7.6% in July, but it remains well above the BoC’s target of 2% annual inflation…