Common Mistakes Real Estate Investors Make in Ontario (And How to Avoid Them)

Real estate investing in Ontario can be highly profitable, but even experienced investors can make costly mistakes. From underestimating expenses to failing to follow landlord-tenant laws, small missteps can lead to financial setbacks.

In this blog, we’ll cover the most common mistakes investors make—and how to avoid them to maximize your success in Ontario’s real estate market.

1. Underestimating Expenses

Mistake:

Many investors focus only on the mortgage payment and forget about additional costs such as:

• Property taxes

• Insurance

• Maintenance & repairs

• Vacancy periods

• Legal fees & property management

Failing to account for these can lead to negative cash flow.

How to Avoid It:

Before purchasing, calculate all costs and use the 1% Rule:

Your monthly rental income should be at least 1% of the property price to ensure cash flow.

Example: If you buy a $600,000 rental property, aim for at least $6,000/month in gross rent.

2. Not Understanding Ontario’s Landlord-Tenant Laws

Mistake:

Ontario has strict tenant protections, and many investors fail to understand eviction rules, rent control, and lease agreements.

For example:

• You can’t evict a tenant just because you want to sell.

• Rent control applies to most properties built before Nov 15, 2018.

• If you move a family member in, you must give the tenant compensation.

How to Avoid It:

Read up on Ontario’s Residential Tenancies Act (RTA). Use legal lease agreements (Ontario’s Standard Lease is required). Work with a property manager if you’re not familiar with the laws.

3. Overleveraging (Taking on Too Much Debt)

Mistake:

Some investors buy too many properties too fast, relying heavily on mortgages and lines of credit. This works when interest rates are low, but when rates rise, cash flow can turn negative.

How to Avoid It:

• Follow the 50% Rule: Half of your rental income should cover non-mortgage expenses.

• Stress test your investment: Assume interest rates rise by 2-3% and see if you still cash flow.

• Don’t rely 100% on appreciation—focus on cash flow-positive properties.

4. Ignoring Market Research & Location Trends

Mistake:

Buying in the wrong neighborhood can lead to:

• High vacancy rates

• Low appreciation

• Difficult tenants

Some investors chase "cheap" properties instead of focusing on high-demand rental areas.

How to Avoid It:

Research market trends, population growth, and infrastructure projects. Stick to high-demand areas like Hamilton, Mississauga, Burlington, and Kitchener-Waterloo. Look for properties near transit, schools, and major employers.

5. Not Having an Exit Strategy

Mistake:

Many investors don’t plan for different scenarios, such as:

• What if property values drop?

• What if rental regulations change?

• What if you need to sell quickly?

Without a backup plan, you could be forced to sell at a loss.

How to Avoid It:

• Have a long-term plan (buy-and-hold, flip, BRRRR, or short-term rental).

• Keep a cash reserve to cover 3-6 months of expenses.

• Buy properties that can generate positive cash flow, even if the market slows down.

Conclusion

Avoiding these common mistakes can save you thousands and help you build a successful real estate portfolio in Ontario.

Know your numbers – Budget for ALL expenses.

Follow landlord-tenant laws – Stay compliant to avoid legal trouble.

Buy in the right location – Research high-demand rental markets.

Manage debt wisely – Ensure positive cash flow, even if rates rise.

Plan your exit strategy – Be prepared for market changes.

By staying informed and making smart investment decisions, you can maximize profits and minimize risks in Ontario’s real estate market.