My wife and I like to invest in smaller residential rental properties, we have found it's a good way to earn some extra income, and the big bonus is the equity you are gaining each month, which can be used for leverage to purchase other properties as well as a fall back in case of emergencies. On our journey, we have stuck to single family rentals, for a few reasons. Such as they are typically easier to sell quickly, can have a lower cost to purchase initially, and its a good starting point for new investors.
We like the ease of dealing with one family per unit, while the financial gains may not be as great as multi-residential units, we like that we can work full time and not have to devote a great amount of our time to maitenance, as well, you are more likely to get thoughtful tenants if you have a single family home, which commands more rent than multi-residential, (usually). We find it's a more personal experience, we like our tenants and their family, so it's an all around better experience.
Equity as leverage: A bonus to having a few rental properties, is the equity you gain each month, which can in turn be used to buy more properties, depending on your financial situation. A good rule of thumb to remember is, you can only borrow up to 80% of your home/rental value if you plan to refinance, so keep that in mind before you pay for an appraisal and try to get financing. Doing a quick market search to see what's for sale, and how much can assist you greatly, and it does not cost you anything.
Down Payment: This one can be hard, most lending institutions will require a minimum of 20% for a secondary non owner/family member occupied property. New investors will often get family to move into the rentals as a way to bypass the 20% down payment and purchase for only 5% down, it's a way to invest without the financial burden of the higher down payment, but it also costs you a CMHC insurance payment upfront, which can be thousands of dollars on top of the purchase price, with 20% down, you do not have to pay the insurance charge, so you have to weigh your options carefully. The benefit of putting the higher amount down is you usually have borrowable equity once you start renting, which is not the case with the lower amount.
Tax Time: Having income properties carries many benefits, one of these is tax write off's, often the amount of write off's will negate much of what you would have to pay come tax time, writing off such things as general fix ups, new appliances, lawn maintenance, even writing off a portion for a home office and office supplies used can be helpful. I would suggest getting the free guide at your local post office, or online at the government website, which I will link at the bottom of this page. Remember that basically any expense you incur can be written off, even the mortgage, taxes, insurance, condo fees if appliciable, even the down payment if you used a loan/line of credit, the interest can be written off!
We are very happey and lucky to own rental properties, one benefit that often goes unoticed is the people, meeting great people that you wouldn't have otherwise was one thing we never thought about when we got into it. I hope this has been informative, and would suggest that anyone weigh the pro's and con's before getting into the rental market!