Financing Options for Short-Term and Long-Term Rental Properties in Calgary

Introduction

Investing in Calgary’s rental market is an exciting opportunity, but understanding financing requirements is key to success. Whether you’re purchasing a property for short-term rentals (STRs) like Airbnb or long-term rentals (LTRs), the down payment and financial obligations vary based on how you plan to use the property. This guide breaks down Calgary’s financing options for both STRs and LTRs to help you navigate your investment journey.

Down Payment Requirements for Short-Term Rentals (STRs)

The down payment needed for a short-term rental depends on whether you plan to live in the property or use it strictly as an investment.

1. If You Plan to Live in the Property (Owner-Occupied)

• 1-2 Units:

  • Minimum 5% down payment on the first $500,000 of the purchase price.
  • 10% on any amount above $500,000, provided the total price is under $1 million.
  • This qualifies as a homeowner loan under Canadian Mortgage and Housing Corporation (CMHC) rules.
    Learn more: CMHC

• 3-4 Units:

  • Minimum 10% down payment.

2. If You Do Not Plan to Live in the Property (Investment Property)

• Non-Owner-Occupied Properties:
  • Minimum 20% down payment required for properties with fewer than five units.
  • Properties with more than four units or classified as commercial may require 20%-35% down, depending on factors like location and cash flow potential.
    Learn more: WOWA.

New Licensing Fees and Moratorium

Starting in 2025, Calgary city council has approved new licensing fees for STRs:

• Primary Residences: $172 annually.
• Non-Primary Residences: $510 annually.
  Additionally, the city may freeze licenses for non-primary residences when long-term rental vacancy rates drop below 2.5%. This change is designed to balance the housing market. Learn more: Calgary Herald.

Down Payment Requirements for Long-Term Rentals (LTRs)

LTRs offer more accessible financing options, making them a great choice for first-time buyers and those seeking a stable investment.

Owner-Occupied and Rental Properties

• Properties Under $500,000:
  • Minimum 5% down payment.
• Properties Between $500,000 and $999,999:
  • 5% on the first $500,000 and 10% on the remaining amount.
• Properties Over $1 Million:
  • Minimum 20% down payment required.

Learn more

Additional Benefits for LTR Financing

• Mortgage Default Insurance: Required if the down payment is less than 20%, increasing costs but providing flexibility. Learn more: Best Mortgage Online.
• Gifted Down Payments: Family members can contribute, making LTRs more affordable for first-time buyers. Learn more: Richard’s Mortgage Group.

Comparative Analysis of STRs vs. LTRs

Tips for Financing Success

1. Assess Your Risk Tolerance:
   STRs offer higher returns but require larger upfront investments and active management. LTRs are stable and predictable, making them better suited for risk-averse investors.

2. Consult Professionals:
   Mortgage brokers can help secure the best rates, while financial advisors can guide you toward long-term strategies.

3. Build a Strong Financial Profile:
   A high credit score and low debt-to-income ratio will improve your chances of securing favorable loan terms.

4. Stay Updated on Regulations:
   Calgary’s rental market rules are evolving. Regularly check city updates to ensure compliance.

Conclusion

Understanding Calgary’s financing options for STRs and LTRs is essential to align your investment strategy with your financial goals. STRs require higher down payments and stricter compliance but can yield significant returns. LTRs, on the other hand, offer more accessible financing and long-term stability, making them a great choice for first-time buyers and those seeking predictable income.

By understanding the financial landscape and staying compliant with Calgary’s rules, you’ll set yourself up for success in Calgary’s rental market.

Continue Your Journey

If you want to dive deeper into Calgary’s rental market, check out these related blogs:

• Short-Term vs. Long-Term Rentals in Calgary: Which One Wins for ROI?
• Navigating Calgary’s Short-Term Rental Regulations: What Investors Need to Know

More coming soon:

• Occupancy Rates and Seasonal Trends in Calgary’s Rental Market
• Operating Costs and Management Requirements for Short-Term vs. Long-Term Rentals
• Risk Management Strategies for Calgary Rental Investors

Ready to explore more? Contact Hasan Sharif to get started today: 403-808-9705
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