4 Ways To Invest In The Canadian Real Estate Market

4 Ways to Invest in the Real Estate Market


For most Canadians, purchasing a home for use as a principal residence is the largest investment they’ll ever make. It’s also one that has paid off handsomely for those who’ve been in the market long term; according to the Canadian Real Estate Association’s MLS Home Price Index, which measures the overall value of homes sold, appreciation in the Canadian housing market increased nearly 76% between June 2009 – 2019. The nation’s major urban centres experienced an even greater uptick over that time frame, with home values soaring 122% in the Greater Toronto market, and by 92% in Greater Vancouver.

There are some clear benefits to investing in real estate as an end user – one is the ability to use leverage to get into the market with relatively very little down (in Canada, a principal residence priced below $1 million can be purchased with a down payment between 5 – 7.5%), and equity grown over time is also a form of forced savings, with a positive impact on the borrower’s credit score.

The downside, however, is that homeownership is a generally illiquid investment. One must sell their home and absorb considerable transaction costs to access their equity: land transfer tax, real estate commissions, and the costs of moving can all chip away at your returns. And, should the market have taken a downward turn since the home was purchased, it can be an especially painful crystalized loss, as homeownership is as much an emotional investment as it is a financial one.

Beyond residing in your investment, however, there are a number of ways investors can get their feet wet in the market, with varying degrees of involvement. Here are a few common ways for Canadians to invest in real estate.

Becoming a Landlord

The most traditional way of expanding one’s investment in the real estate market is to purchase rental property. On paper, the benefits seem straightforward – investors can still use mortgaged leverage to buy the property, and directly offset their mortgage payments and maintenance costs through the rent they charge. Depending on the size of the rental, between 50 – 100% of its projected profit can be considered by your lender when qualifying you for financing. Once the mortgage is paid off, rent turns to profit – and all the while, the property itself is appreciating in value in an upward market.

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