STEP 1: Setting the Foundation
The first step to making your rental property dreams a reality is choosing a dedicated account to save for your down payment.
Which account will be best for you depends on a few things. Let's break them down here:
1) If you are a first-time home buyer, an FHSA or First Home Savings Account will be the best place to put your down payment savings. If you need these funds within the next 5 years, it's best to keep them in cash or a GIC that is a lower risk within your FHSA. If you don't need these funds for at least 5 years, investing them inside your FHSA in the broad market, low-fee ETFs like XEQT or VFV could be a good option to grow your money for a more extended term.
2) If you are NOT a first-time home buyer and need your money within the next 5 years, a HISA (high-interest savings account) or TFSA (tax-free savings account)
with cash only or a GIC inside the account will be your best option.
If you do not need the money within the next 5 years, your TFSA with investments inside the account like broad market, low fee ETFs like XEQT or VFV could be a great option to grow your money longer term.
Now that you've selected an account type, go to your institution of choice (bank or brokerage) and open the account!
Tip: If you plan to invest in a GIC, you'll want to open your account at a regular bank. If you plan to invest in a high-interest savings account or ETF, a brokerage like Wealthsimple or Questrade will work great, but your regular bank will also have these options.
Now that you have your account opened, stay tuned for next week, when we will give you step 2 on your way to your dream property!