Investing in Houses: What To Consider Before Buying a Property for Investment in GTA?

If you’ve been thinking about buying an investment property in Etobicoke or any other part of the Toronto area, you’ve come to the right place. At a time when the stock market is unpredictable, real estate investors can enjoy tens of thousands of dollars in extra income.

However, if you decide to buy an investment property, you will probably have many questions and concerns. What will your operating costs be for owning a rental? How much are property management fees? Do they charge a large percentage of your monthly rental payments? How do you find one who is well-versed in working on properties in the Vaughan area?

Should you buy a fixer-upper or stick to properties that are move-in-ready? What about securing a mortgage company and paying for other expenses? How much of a down payment do you need on your investment property?

While these certainly won’t be the only questions you will have along the way when buying rental properties, they provide a good start. However, there is still much more to learn when it comes to buying rental property. Here are some real estate investing tips for getting you started in Meadowvale or any other part of the Toronto area.

Tips When Buying an Investment Property in Toronto

The real estate market is healthy and vibrant, making this the perfect time to buy your first rental property. However, it’s not as simple as looking for real estate you like and slapping down a down payment. There are many things you should do to prepare for buying an investment property.

Have Your Finances in Order

Before you place the down payment on any real estate, it’s important to assess your financial health. You’ll need to ensure that you don’t have any cash flow problems, either with your primary residence or with your income property.

Consider Hiring a Property Management Company

You can think about hiring a property manager before putting any money down on any real estate. They can help steer you toward real estate in Streetsville or other towns in the Toronto area that will end up being a cash cow. You also may want to consult an investment advisor for help balancing your other assets to include real estate in your portfolio.

Assemble a Team

As you start to put together your team, you should remember that not everyone will be the right fit. While you will need an insurance agent and a property manager, you should consider a few options before selecting the right ones for your team. You’ll want someone you can work well with and who charges fair rates that you can afford with the money you make.

Research Rents and Ideal Locations

A real estate agent will give you easy access to the local market, whether that’s Port Credit, Oakville or any other part of the Greater Toronto Area. They can help you research how much you can expect in rent payments every month and how much the property taxes will be. You’ll want your first rental property to be one that grants you significant monthly income.

Choose an Appropriate Mortgage

The purchase price for the investment property is only the beginning. Remember, you’re not buying a primary residence, although there are some similarities between these two types of transactions.

Most lenders expect a down payment that amounts to at least 20% of the property value. Although you are buying a rental property, you still need to keep the mortgage payments and mortgage interest in line with what you can expect as far as monthly rent payments while keeping other expenses in mind as well.


You’ll need multiple types of insurance in place for all your rental properties. Any rental property must have a homeowners insurance policy designed to protect the property even though you have tenants living in it.

Additionally, you will need landlord insurance for your investment property. This type of insurance usually pays for property damage and lost rental income and provides liability protection, which will be needed if a tenant or their guest suffers any kind of injury due to problems with maintaining the property.

Learn About Landlord-Tenant Laws

In Ontario, whether you’re in Burlington, Thornhill, East York or any other part of the Toronto area, you need to follow all the provincial laws. Regulatory requirements in the area include protection against wrongful evictions, repayment agreements and mediation in the event that the landlord and tenant can’t come to terms on their own.

What Makes a Good Investment Property?

When you decide to invest in real estate, you should look for a property that’s low maintenance and sells for the right price. Of course, market conditions will impact the amount of money you will pay for your investment property.

If you can afford to pay the entire price upfront, it would be a good idea to do so, but financing is always an option. When you look to purchase rental properties, here are some things to keep in mind.

Monthly Cash Flow

One of the most important factors of owning rental property is your cash flow. The monthly rental income must be enough to cover everything from regular maintenance costs to repairs, taxes and all the other expenses associated with owning an investment property. You may wish to pass some expenses like the monthly utility bills onto the tenant.


While you pay a certain amount of money upfront to purchase the property, that price is only the beginning. If you buy investment property in most parts of Mississauga, like Mineola or Meadowvale or the North York area, including Downsview and York Mills, it will probably appreciate in value. As the value of the property increases, so will your rental income because you will be able to increase the rent every few years.

Equity Build-up

Every time you make a mortgage payment, you will build up more equity in the property. That makes every payment on the mortgage an essential part of building your investment. Building equity is an important part of the investing process when it comes to owning an investment property.


Before placing any money down on any investment property, you should determine what improvements will be needed, if any, and how much money it will take to bring the units up to code and make them attractive to potential tenants. Investing is a process when it comes to real estate, and part of that process is improving the property.

3 Taxes to Consider When Buying Your First Rental Property

owning rentals

Taxes are an important part of your cash flow when you own investment property. Of course, every area is subject to multiple taxes, so you’ll have to keep those in mind when you are determining how much you can collect in rent payments every month.

Land Transfer Taxes

In North York, East York, Etobicoke or any other part of the Toronto area, you will have to pay land transfer taxes when you make your purchase. In Ontario, this tax amounts to every transfer of property. It’s calculated on the value of the consideration and includes the purchase price, the assumed liabilities, conferred benefits, soft costs and the price of any upgrades.

Additionally, the Non-Resident Speculation tax applies to landlords who don’t live in the area. It amounts to 20% of the purchase price.

Income Tax on the Rental Income

In addition to the property-related taxes, you will also pay income tax on all the rent your tenants pay. If you have calculated your monthly income accurately and paid enough in tax throughout the year, tax time will be a breeze.

Capital Gains Taxes

Every investment is also subject to capital gains taxes when you sell it if you sell for more than what you paid. Throughout Ontario, including in Scarborough, New Toronto and Long Branch, the capital gains tax on rental property for the highest income bracket is 26.76%.

Only half of the capital gain on any sale is taxed based on the marginal tax rate. You incur long-term capital gains when you hold the property for more than a year and then sell it, which is standard with most real estate investors who buy and hold property. If you live in Canada, you can claim the capital gains reserve.


How Do I Avoid Paying Taxes on a House Flip?

Canadians don’t pay a capital gains tax when they sell their primary residence, so many flippers claimed the house they were flipping as their primary home. However, the Canada Revenue Agency put a stop to this practice by imposing stricter requirements on a house being a primary home.

There is a new tax specifically targeting house flippers. However, Ontario residents forced to sell a recently purchased home for certain reasons are eligible for an exemption. These reasons include pregnancy, death, divorce, a new job, or illness or disability.

At the end of the day, the intent of the purchase is everything when it comes to flipping houses. If you bought a house with the intent of selling it for a profit, it would be considered business income. However, if you buy it to rent it out for a time and then sell it, the sale would be subject to a capital gains tax, with only half of the gains reported on your tax return.

What Is a Good Return on Investment for Rental Property?

A good return on investment is generally greater than 10%, but 5% to 10% is also acceptable. The state of the market plays a significant role in the size of your profit margins.

Final Thoughts

Purchasing real estate with the goal of renting it out is a big move. Before you do anything, you should do all the math to ensure that you will be able to earn enough cash flow to be turning a profit every month.

There are so many things to consider that you will find helpful to have a knowledgeable property management company to help you make decisions. From taxes to mortgage payments, building equity, and collecting rent, there is much to consider.

When you take the time to really dig into the process and look at appropriate properties, you will find that investing is one of the best things you can do for your investment portfolio.

Sabine Ghali
Sabine Ghali
Helping real estate investors build wealth over time

Sabine Ghali, Managing Director at Buttonwood Property Management, Award Winning Real Estate Broker and an Entrepreneur at heart. Sabine is on a mission to help investors create real estate wealth over time in the Greater Toronto Area. Sabine is published in a number of media outlets, including Toronto Star, The Globe and Mail, Toronto Sun, Entrepreneur, Forbes, and Gulf News, among many others.