Investing in rental properties can be a lucrative venture, providing a steady source of income and potential for long-term growth. However, navigating the financing aspect of acquiring rental properties requires careful consideration and planning. In this guide, we’ll walk you through what to expect and best practices for financing a rental property with a Calgary Mortgage Broker

Getting Ready

a well-prepared team to assist you in the process. Here’s what you need to consider:

1. Plan Ahead with a Professional Team

Plan ahead and seek advice from a range of industry professionals, including:

• Calgary Mortgage Broker
• Real Estate Agent
• Accountant for tax planning
• Lawyer
• Property Manager

Your Calgary Mortgage Broker with Axiom Mortgage Solutions can provide referrals to these industry experts, helping you build a strong support team for your rental property ventures.

2. Discuss Your Plans and Financing Needs

• Consider and discuss your plans with your team, determining whether this rental purchase is a one-time investment or part of building a rental property portfolio.
• Discuss the amount and source of the down payment you have available. A minimum of 20% down payment is typically required for a rental property purchase.

3. Amortization Considerations

• Consider longer amortization for debt servicing. Some lenders still offer 30-year amortizations on conventional financing, providing flexibility in managing your cash flow.

Preparing your Application and Documents for Financing a Rental Property

Before diving into financing options, it’s important to know what you can qualify to purchase and to have the documentation needed for approval ready to go. Even better is to have your Calgary Mortgage Broker review those documents to make sure they will satisfy the requirements of each lender you want to work with. When it comes to financing your rental property, here are some crucial steps and considerations:

1. Lease Agreement and Documentation

• A Lease Agreement for the property you are purchasing may be required during the financing process.
• Ensure you have current valid leases for all rental properties you own.

2. Required Documentation

Prepare the necessary documents for your financing application, including:

• Current mortgage statements
• Secured line(s) of credit statements
• Property tax statements for all properties you own
• Complete T1 Generals, including a Statement of Rental Income to confirm rental income for any existing rental properties you own.

Section 3: Tips and Resources for Successful Rental Property Financing

1. Utilize Online Resources

• Use online platforms like Rentfaster.ca for rental price comparisons and lease agreement templates to streamline your rental process.

2. Optimize Rental Income

• Advertise for rent at the top end of the price range to attract higher-quality tenants, potentially reducing stress as a landlord.

3. Insurance and Finances

• Inform your insurance company that the property is a rental, potentially allowing you to insure the rental income.
• Maintain a reserve fund for vacancies and repairs to mitigate financial challenges.

4. Grants and Tax Considerations

• Explore grants available from your municipality when adding a suite to a property.
• Consider using a Purchase Plus Improvement loan to convert or create a suite within the property.
• Keep a record of the property value if you change its use from residential to rental for tax purposes.

5. Property Selection and Location

• Consider the type of property you plan to purchase and its location. Note that a condominium might be less attractive to a lender than a house, and a metropolitan area could be more appealing than a small town.

By understanding these key aspects and following best practices, you’ll be better prepared to finance your rental properties successfully. Take the time to plan, gather the necessary documentation, and utilize valuable resources to make informed decisions in your rental property investment journey.