Can you buy multiple properties at 5% down in Canada?

Question

I'm a big listener of the BP podcasts and have read most of the books they've recommended there but they're largely American and often talk about American real estate strategies. As both a new investor and a Canadian one, it's hard to tell what relates and what doesn't.

One particular question I have relates to a common strategy that is mentioned a lot on BP. Can I buy a property at 5% down, live in it for a year, then buy and move into another one at 5% down, turn my last primary into a investment property and continue to repeat this process?

I ask because I've been told by a few friends that you only get 5% on your first property then every other property is 20%. These friends are older then I but also have no REI experience so I'm not sure whether I can trust their knowledge on the subject.

As a side question. I'm running out of books to read and would love suggestions on specifically Canadian real estate ones as I feel I'm reading to many American ones.

Jacob Perez · Answer

Hey @Elijah Williamson - You can put 5% down on multiple properties in Canada. The criteria is that is must be a purchase under 1M & be your primary residence.

The situation you described is do able. Buy a home, live in it a year or so, move, and keep it as a rental, buy again for 5% down.

Feel free to DM to chat further.

Chris Baxter · Answer

@Elijah Williamson, the topic of Canadian REI books comes up often.... here are some threads (search 'canadian books')https://www.biggerpockets.com/...https://www.biggerpockets.com/...

My top 3 (in no particular order):

-Commercial Real Estate Investing in Canada (Boiron and Boiron)

-Making Money in Real Estate (Gray)

-Legal, Tax, & Accounting Strategies for the Canadian Real Estate Investor (Cohen and Dube)

Jessica S. · Answer

I have heard good things about Don R Campbell's books on REI for Canadians. Your local library should have some titles of his.

Stevo Sun · Answer

The 20% down is the 'safest' route where no one can question it. If the banks are aware and CMHC signs off you are probably good to go. It's really the insurance piece you want to be cognizant of,  because you hit a 20% down payment amount then insurance is not involved so it becomes a question between you and the lender. It will be the lender's underwriting team making a decision and as long as you are truthful about what you are looking to do then you should have no problem. Circumstances change so you are not locked into one thing or another in the future, but your initial intent is important.

Stevo Sun · Answer

I think it's a fine line people are trying to thread here. You can climb the property ladder by buying primary at 5% down and then moving on and upgrade to another property later on. I think it's a timing and intent thing.

I know a lot of people climb the property ladder buying primary with 5% down on a condo and later upgrading to a house at 5% down. I think the one thing I will caution people is that when you refinance at the end of your mortgage term, you would have to tell the bank or lender that the property is no longer a primary residence. IF on renewal you do not let them know the property is no longer your primary residence, this could be considered mortgage fraud.

Oh one other thing to add, CMHC (and other insurers) can deny your insurance if they see you already have insurance with them for primary residence. So you might be force to do 20% down in order to get financing.

Opinder Dhak · Answer

I bought my first in 2018(5% down) and is currently a rental, In Alberta, Canada.

Second in Nov 2022 with 5% down current primary residence.

I am looking to move and looking for something in Ontario, Do you think I can buy with 5% down for primary residence again after Nov 2023?

Account Closed · Answer

@Elijah Williamson

Your chances of long term cashflow on a property leveraged to 97% are very slim. Once you add on Cmhc you’re starting day one nearly 100% leveraged. This is a bad idea.

Yea, roi goes up with leverage. Yes it is more risky. Do not get married to the idea of appreciation being assured. It isn’t. In about 24 -36 months those jumping on the eastern Canada bandwagon are going to find this out.

Scott Hickey · Answer

@Tyler Stiller is right it works I know several people that have done this especially if both spouses are on a mortgage “you have trouble” one buys one in there name one year another in there name the next.. call it what you wish it’s a loophole that not exploited a lot for using 5% down.. you just have to remember with the debt to income ratio changes it get way harder to get more as your mortgage payments are wayyy higher and using 5% down typically you have to go thru traditional methods but the point is @Tyler Stiller isn’t wrong

Julie Toh · Answer

@Elijah Williamson In my practice as a mortgage broker (Canada), many prospective clients have asked the same question. In theory the strategy @Jacob Perez proposes could work/ has worked, but I caution you that the lender & insurer may decline if the timing is suspicious as per @Tyler Stiller

Your story has to make sense. Work with a mortgage broker who can create a game plan for you.

Can you buy multiple properties at 5% down in Canada?

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