What are the Investment Property Types You Can Finance?

Not every property that looks like an opportunity will actually qualify for an investment loan.

Lenders classify property types differently, and each category comes with its own rules around deposit size, loan terms, and whether a lender will support it at all. The type of property you choose shapes your borrowing capacity, your interest rate, and how much rental income a lender will count toward serviceability. If you're considering investment loans in Toronto, understanding what lenders will and won't back is the starting point.

Standard Residential Houses and Townhouses

Standard residential houses and townhouses on their own title attract the most favourable lending terms. Lenders typically require a 10 per cent deposit plus costs, though you'll pay Lenders Mortgage Insurance (LMI) if your deposit sits below 20 per cent. Most banks will lend up to 90 per cent of the property value for investors, and some will stretch to 95 per cent in specific circumstances, though the higher the loan to value ratio, the more expensive the LMI premium becomes.

Consider a buyer looking at a three-bedroom house in Toronto on a standard residential block. The property has an independent title, no shared walls, and a straightforward rental profile. A lender treats this as lower risk compared to higher-density property types. The buyer can access both variable and fixed rate options, choose between interest only and principal and interest repayments, and expect competitive investor interest rates. The rental income from this type of property is usually assessed at 80 per cent of the advertised rent to account for vacancy and management costs, and that figure feeds directly into the serviceability calculation.

Units and Apartments in Strata Title Developments

Units and apartments within strata title developments are widely financed, but lenders assess them more carefully than freehold houses. The key concern is the condition and financial health of the body corporate. A lender will review the strata report before approving the loan, looking specifically at the sinking fund balance, any major works planned or underway, and whether the building has significant defects or compliance issues.

If the sinking fund is underfunded or the body corporate has active legal disputes, some lenders will decline the application outright. Others may lend but reduce the maximum loan to value ratio to 80 or 85 per cent, effectively requiring a larger deposit. Properties in buildings with less than six units, or buildings where a single entity owns more than 50 per cent of the lots, can also be classified as non-standard and may attract higher interest rates or more restrictive loan features.

Toronto has a mix of low-rise unit blocks and newer medium-density developments, particularly around the lakefront precinct. If you're looking at a unit in one of these complexes, request the strata report early and have it reviewed before you make an offer. We regularly see buyers who fall in love with a property only to discover the building's financials won't satisfy the lender's credit team.

Dual Occupancy and Duplex Properties

Dual occupancy properties, where two dwellings sit on a single title, and duplexes on separate strata or torrens titles are both financeable, but the structure matters. If both dwellings are on one title and you're purchasing the entire property as a single asset, most lenders will treat it as a standard residential investment, provided both dwellings are self-contained with separate access, kitchens, and bathrooms.

If you're buying one half of a duplex on its own title, the lender will assess it like a standard townhouse. However, if the other half is still owned by the original developer or builder, some lenders apply stricter conditions until the second dwelling is sold to an independent third party. Rental income from dual occupancy properties is typically assessed on the combined rent of both dwellings, which can improve serviceability compared to a single dwelling at the same purchase price.

Vacant Land for Investment Purposes

Vacant land can be financed, but lenders treat it as higher risk because it generates no rental income and requires holding costs until development begins. Most lenders cap the loan to value ratio at 70 to 80 per cent, and interest rates on vacant land loans are usually higher than standard investment property rates. Some lenders won't finance vacant land at all unless it's part of a combined land and construction package.

If you're planning to build on the land, you'll need to move from a land loan into a construction loan once plans are approved and the build is ready to commence. Serviceability is assessed on your ability to service both the land loan and the future construction loan simultaneously, so borrowing capacity is often lower than you'd expect.

Serviced Apartments and Properties with Commercial Components

Serviced apartments, hotel-style accommodation, and properties with a commercial component such as a ground-floor shop and upstairs residence are treated differently by lenders. If the property operates under a hotel or serviced apartment management agreement, most mainstream residential lenders will not provide finance. You'll need to approach a commercial lender or a specialist lender, and the loan will usually be structured as a commercial loan with a shorter term, higher interest rate, and larger deposit requirement.

Properties with a genuine residential component and a separate commercial tenancy, such as a mixed-use building, may qualify for residential investment finance on the residential portion, but expect the lender to discount or exclude the commercial rent from the serviceability assessment.

Properties in Regional, Rural, or Remote Locations

Location influences lending appetite as much as property type. While Toronto itself is classified as a regional centre within the Lake Macleod local government area, lenders generally have no issue financing standard residential property here. However, if you're looking at property in more remote or thinly traded locations, such as small coastal villages or rural blocks with limited infrastructure, some lenders will either decline or apply a higher interest rate and lower loan to value ratio.

Lenders assess regional property based on population size, transaction volume, and proximity to services. Toronto, with its proximity to the M1 motorway, established schools, and the Cockle Creek shopping precinct, is well within the lending appetite of all major banks.

Properties Requiring Structural Work or Renovation

If the property you're purchasing requires significant structural work, is uninhabitable, or has been red-tagged by the local council, most lenders will not provide standard investment finance. The property must meet minimum habitability standards and be capable of being rented in its current condition.

Minor cosmetic renovation is not usually an issue, but if the property needs a new roof, structural repairs, or has asbestos that must be removed, you may need to approach a specialist lender or fund the purchase and repairs with cash or alternative finance, then refinance once the work is complete and the property is tenanted.

Choosing the Right Property Type for Your Portfolio

The property type you choose should align with your borrowing capacity, your risk tolerance, and your longer-term strategy. Houses and townhouses on standard titles offer the most flexibility and the widest lender choice. Units and apartments can deliver stronger rental yields, particularly in high-demand areas close to amenities, but come with body corporate risk and potentially more restrictive lending terms.

If you're building a portfolio and plan to leverage equity from one property to purchase another, starting with a property type that holds its value and maintains broad lender appeal makes it easier to refinance and access that equity down the track. If you're focused on cashflow and rental return, a well-located unit in a well-managed building may deliver better income relative to the purchase price, even if future borrowing capacity is slightly constrained.

Call one of our team or book an appointment at a time that works for you. We'll review your situation, discuss which property types suit your goals, and connect you with lenders who back the type of investment you're looking to make.

Frequently Asked Questions