Investing in real estate and becoming a landlord in Ontario can be a smart long term strategy for building wealth, but it’s not as simple as purchasing a home and putting up a “For Rent” sign.
From financing and legal requirements to tenant screening and property management, there’s a lot to navigate. Whether you’re renting out your basement suite or buying a dedicated investment property, here’s what you need to know to get started.
Financing Your Investment Property
Get Mortgage Pre-Approval
Just like purchasing a principal residence, the first step is to speak with a mortgage broker or lender about getting pre-approved. Investment property mortgage rules are different in Canada and often more stringent.
Lenders typically require:
- A minimum 20% down payment for non owner-occupied properties
- A strong credit score (ideally 680+)
- Proof of income and existing debts
- Documentation for any rental income you’re claiming (current leases or market rent letters)
Mortgage approval also factors in a percentage of your projected rental income, especially for duplexes or properties with basement apartments. This could help you qualify for a larger purchase.
Down Payment Options
Coming up with a down payment is one of the biggest hurdles for new landlords. Here are some common and creative options:
- Savings: The most straightforward approach.
- Home Equity: Use a Home Equity Line of Credit (HELOC) from your current property to fund the down payment. Depending on your bank, you should be able to access up to 80% of the value of your home if approved
- Joint Venture: Partner with another investor or family member and split the down payment and equity.
- RRSP Withdrawals (for owner-occupied units): If you’re buying a duplex or triplex and living in one unit, you may qualify under the Home Buyers’ Plan.
- Gifts from Family: Ensure you have a signed gift letter and no repayment terms.
Know the Legal Requirements
Before becoming a landlord, understand your obligations under the Residential Tenancies Act (RTA) in Ontario. Some key highlights:
- You must provide a standard lease agreement.
- Rent increases must follow guideline limits and be given with 90 days’ notice.
- You cannot evict a tenant without a valid reason (e.g., owner occupancy, non-payment or substantial renovation).
- Security deposits are not allowed, only a rent deposit (typically first and last month’s rent).
Make sure to bookmark the Landlord and Tenant Board (LTB) website and become familiar with the most commonly used forms such as: N4, N12 and L1.
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How to Find and Screen Tenants
Getting the right tenant is probably the most important part of being a successful landlord. You can screen tenants yourself or hire a professional property management company to do it for you.
If You’re Screening Tenants Yourself:
Here’s a recommended process:
- Use a rental application form that asks for employment info, rental history and references.
- Ask for proof of income including a minimum of 2 pay stubs and/or an employment letters
- Run a credit check using platforms like Equifax or Naborly
- Call references, most importantly from current or previous landlords. Make sure you have a set list of questions to ask.
- Trust your gut. If something feels off, it probably is. Having your property empty for a month is certainly better then bringing on a problem tenant
Hiring a Screening Company:
Professional tenant screening services often cost between $25–$50 per applicant and can include:
- ID verification
- Employment and income checks
- Full credit report
- Criminal record check (where applicable)
Hiring a property manager to handle this (and possibly everything else) could be a smart move if you’re short on time or managing multiple units. Don’t forget that whatever fees you pay to manage your property are tax deductable.
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Additional Considerations
- Insurance: Make sure you get landlord insurance, not standard homeowner coverage. Make it mandatory that tenants carry renter’s insurance as well and ask for proof prior to possession
- Taxes: Rental income must be declared. You can deduct certain expenses like mortgage interest, utilities (if you pay them), maintenance, and property management fees.
- Maintenance Budget: Set aside 5–10% of monthly rental income for unexpected repairs.
Final Thoughts
Becoming a landlord in Ontario is a big step but with proper planning and the right team in place it can be a highly rewarding investment. From securing financing and finding quality tenants to understanding legal requirements and building long-term wealth, it’s a journey worth taking.
If you’re considering purchasing an investment property in Ottawa or the surrounding area, our team is here to help. We can connect you with trusted mortgage professionals, property managers and walk you through the entire process from purchase to tenant screening. After all, we are investors ourselves!
Your real estate goals deserve expert guidance. Let’s chat. Call 613.909.8100 or reach us by email at info@PilonGroup.com.
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