Gotchas To Look Out For When Making Real Estate Investments
Wednesday, July 9, 2025
When financing investment properties most investors make the same mistakes. With a wave of excitement, these new investors go out and get pre-approved by their mortgage broker for an investment property mortgage in Canada. When given the green light by their mortgage broker, they immediately run to find a real estate agent who knows about investing in real estate. They found the perfect investment property and get their offer accepted - everything sounds good and well, right?
But then closing day approaches and the mortgage broker calls to say that the mortgage program the new investors were hoping for isn’t going to work out, but that they will still be able to purchase the investment property. Instead of putting down 5% they’ll need to put down 10% and the interest rate on the mortgage is going to be 7.8% instead of 5.9%.
Here is where the problems begin. How do these new investors come up with more cash? The return on investment that they’ve budgeted for will significantly change with these new numbers - as will their monthly cash flow. It might even go from a positive to a negative!
Stuck between a rock and a hard place, this time sensitive issue will likely result in a flurry of calls. Can a new agent or a new broker provide better options? Can the bank of Mom and Dad help out?
How did these investors get in this situation - and more importantly - what can you as a new investor look out for to make sure this doesn’t happen to you?
Gotcha #1 – Your Mortgage Broker’s Track Record
Always ask your friendly neighbourhood mortgage broker how many investment properties they have actually closed on. You are looking for experience. Let someone else work on a beginner. Not you, it’s not worth your time or your money.
Gotcha #2 - Read The Fine Print
Always ask the mortgage broker to send you the fine print. Ask for the details of the mortgage program for financing investment properties. Check that the interest rate on the mortgage program doesn't have any clauses about increasing the interest rate based on your down payment amount. We've seen brokers offer mortgage programs without fully understanding the program. You should know that these mortgages for financing investment properties are hyped and sold to the brokers just like anything else...with salespeople and marketing flyers. Some of the marketing material may highlight a certain interest rate. But the fine print may state that your credit score must be above 650 AND the down payment must be 15% to qualify, not 10% as you anticipated.
Just because there’s fine print, doesn’t mean it’s intentionally malicious. There’s fine print in every deal, whether it be a car purchase or a commercial lease or financing investment properties. However, if your banker or mortgage broker hasn’t been through any investment mortgages they may be totally unaware of these critical points. So take it upon yourself and ask them to email or fax you the details of the mortgage program.
Gotcha #3 - Know Your Credit Score
You can pull your credit score from Transunion or Equifax and it will not affect your score. When you pull your credit score yourself it's called a 'soft pull'. Your credit score plays an integral part in getting any mortgage and it's amazing how many people don’t know their own score. You may think you have perfect credit, but a single missed payment of as little as $20 on your credit card bill 6 months ago can drop your score from 660 to 610 and you may no longer qualify for the deals you were hoping for.
Real Estate Investing is a real business. Treat it as such. Know your mortgage broker’s background, know the details of financing investment properties, know your credit score, and ask questions! It will save last-minute panic attacks two days before closing.
If you are thinking about becoming a real estate investor yourself, or you are already an investor and would like to leverage your current investments into more properties, or you are looking to sell one or more of your investment properties, give me a call at 905-683-7800. You can also email me at brian@briankondo.com.
I’ll make sure to refer you to a mortgage specialist who knows how to finance investment properties and guide you through every step of the investment property buying or selling process. I’m here to help you with all your real estate investment needs.
Thanks For Reading Today’s BLOG!
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Brian Kondo
Sales Representative / Team Leader
The Brian Kondo Real Estate Team
Re/Max Hallmark First Group Realty Ltd.
905-683-7800 office
905-426-7484 direct
brian@briankondo.com
www.BrianKondo.com
www.BrianKondoTeam.com
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