Real estate investing in Alberta offers some of the best conditions in Canada. No land transfer tax, relatively affordable entry points compared to Ontario and BC, and a strong rental market driven by Calgary and Edmonton's growing populations. But financing investment properties works differently from buying your primary residence, and understanding those differences is essential before you make your move.
Down Payment Requirements for Investment Properties
The rules are straightforward but non-negotiable. Investment properties require a minimum 20% down payment. There is no way around this — mortgage default insurance (CMHC, Sagen, Canada Guaranty) is not available for rental or investment properties.
What 20% down looks like at various price points:
- $300,000 property — $60,000 minimum down
- $400,000 property — $80,000 minimum down
- $500,000 property — $100,000 minimum down
- $750,000 property — $150,000 minimum down
Some lenders and programs require 25% down for investment properties, especially if you already own multiple rentals. A few alternative lenders may accept 15% down in specific situations, but these are exceptions with higher rates.
Where the Down Payment Can Come From
For investment properties, lenders accept the following sources:
- Personal savings — the most straightforward
- Equity from your primary residence — through a HELOC or refinance
- Equity from existing rental properties — if you have enough built up
- Non-repayable gifts from immediate family — less common for investment purchases, and not all lenders accept this
Borrowed down payments (from a line of credit, for example) are allowed by some lenders, but the payments on that borrowed amount count against your debt service ratios. This can significantly reduce how much mortgage you qualify for.
How Rental Income Affects Your Qualification
This is where investment property financing gets interesting. Lenders allow you to use a portion of the expected rental income to offset the carrying costs of the property. But they do not use the full rental amount — they apply a discount to account for vacancies, maintenance, and other risks.
The Rental Income Offset
Most lenders use 50% to 80% of the gross rental income for qualification purposes, depending on the lender and whether you have existing rental management experience.
Example calculation:
You are purchasing a property for $400,000 with 20% down ($80,000). The mortgage is $320,000. Expected rental income is $2,200/month.
- At 50% offset: $1,100/month of rental income counts toward qualification
- At 80% offset: $1,760/month of rental income counts toward qualification
The difference between 50% and 80% can determine whether you qualify or not. This is why lender selection is critical for investment property financing. A broker who knows which lenders use more favorable rental offsets can make or break your deal.
Proving Rental Income
For a property you are purchasing, lenders typically accept:
- A signed lease agreement if the property is already tenanted
- A professional rental appraisal or comparative market analysis showing expected market rent
- A realtor opinion letter confirming typical rent for comparable properties in the area
For properties you already own, lenders will look at your T1 General tax returns to verify reported rental income through your Statement of Real Estate Rentals (T776 form).
The Refinance-to-Purchase Strategy
This is one of the most effective strategies for building a rental portfolio in Alberta, and it is how experienced investors scale without constantly coming up with new down payments from savings.
How It Works
- Buy your first rental property with 20% down
- Hold it for 12 to 24 months while it appreciates and you pay down the mortgage
- Refinance the property up to 80% of its current appraised value
- Use the equity pulled out as a down payment for your next property
- Repeat
Real-world example:
You purchase a duplex in Calgary for $400,000 with $80,000 down (20%). Your mortgage is $320,000. After two years, the property appraises at $460,000. You refinance to 80% LTV: $460,000 x 80% = $368,000. After paying off your existing $305,000 balance (accounting for principal payments), you have approximately $63,000 in equity to use as a down payment on your next property.
This strategy works well in appreciating markets, but you need to account for refinancing costs (appraisal, legal fees) and ensure the rental income from the first property still supports the higher mortgage.
Multi-Unit Property Financing
Properties with two to four units offer compelling advantages for investors. You get multiple income streams from a single purchase, and some lender programs are specifically designed for multi-unit buildings.
Duplexes, Triplexes, and Fourplexes
- Duplexes (2 units) — Most lenders treat these similarly to single-family investments. 20% down, standard rental offset rules.
- Triplexes (3 units) — Some lenders require additional documentation or higher credit scores. Rental income from all three units can be used for qualification.
- Fourplexes (4 units) — This is the sweet spot for many investors. Four rental incomes from one mortgage. Some lenders have specific fourplex programs with competitive rates.
Five Units and Above
Once you cross into five or more units, the property is classified as commercial. Commercial mortgages have completely different qualification criteria, typically require 25% to 35% down, and are priced differently. If you are looking at five-plus-unit buildings, you are entering a different financing world that requires specialized commercial lending expertise.
Alberta-Specific Advantages for Investors
No Land Transfer Tax
This is worth repeating because it has a massive impact on investor returns. In Ontario, buying a $400,000 investment property costs you $4,475 in land transfer tax. In BC, it costs $6,000. In Alberta, it costs zero.
When you are scaling a portfolio and purchasing multiple properties over several years, the absence of land transfer tax in Alberta saves you tens of thousands of dollars. That money stays in your pocket or goes toward your next down payment.
Strong Rental Yields
Calgary's rental yields are among the best in Canada's major cities. While Toronto and Vancouver investors often see cap rates of 3% to 4%, Calgary investors can find properties with cap rates of 5% to 7%, particularly in secondary neighborhoods and multi-unit buildings.
Growing Population
Alberta's population growth — driven by interprovincial migration and immigration — continues to support rental demand. People are moving to Calgary for affordability relative to other major cities, and many of them rent before they buy. This creates a deep and growing tenant pool.
Portfolio Scaling: What Lenders Look For
As you acquire more properties, qualification becomes progressively more challenging. Here is what lenders evaluate as your portfolio grows:
Properties 1 to 4
Most A-lenders (major banks and monoline lenders) will finance your first four investment properties with standard terms. Net worth requirements are minimal, and qualification is primarily income-based.
Properties 5 to 10
Some A-lenders will go up to five or six rental properties. Beyond that, you typically move to B-lenders or specialized rental portfolio programs. Rates may be slightly higher, and lenders will want to see a track record of successful property management.
Lenders at this stage evaluate:
- Your overall portfolio net worth
- Average cash flow across all properties
- Your vacancy history and property management approach
- Your overall debt-to-asset ratio
- Your personal credit score (still needs to be strong)
Beyond 10 Properties
At this level, you are working with specialized commercial lenders or private capital. Blanket mortgages (a single mortgage across multiple properties) may become an option. Portfolio lending programs that evaluate your entire real estate business rather than individual properties are also available.
Common Mistakes Investment Property Buyers Make
Underestimating Expenses
Rental property expenses extend far beyond the mortgage payment. Budget for property taxes, insurance, maintenance (typically 1% of property value per year), vacancies (assume 5% to 8% of annual rent), property management fees (if applicable, usually 8% to 10% of rent), and capital expenditure reserves.
Ignoring Cash Flow in Favor of Appreciation
A property that does not cash flow positively from day one puts you in a vulnerable position if the market stalls or declines. Appreciation is a bonus, not a strategy. Your investment should make financial sense based on rental income alone.
Over-Leveraging
It is tempting to pull every dollar of equity out of your properties to buy more. But aggressive leverage leaves you exposed if interest rates rise, property values dip, or you experience unexpected vacancies. Maintain a buffer — both in equity and in cash reserves.
Not Accounting for the Stress Test on Renewals
The stress test applies when you renew your investment property mortgage, not just when you initially purchase. If rates rise significantly, your renewal qualification could be tighter, potentially forcing you into higher-rate alternative lending.
Getting Started
If you are considering your first investment property or looking to expand an existing portfolio in Alberta, the financing strategy matters as much as the property itself. The right mortgage structure, optimal lender selection, and smart use of rental income offsets can mean the difference between a deal that works and one that does not.
Start with a clear understanding of your current financial position, your available capital, and your investment timeline. From there, a broker who specializes in investment property financing can map out a strategy that scales with your ambitions while protecting your downside.
