Buying a home is a big financial commitment. Between the mortgage, property taxes, insurance, utilities and maintenance, the monthly cost can feel overwhelming - especially for a first-time buyer.
But there is another option worth considering: buying a duplex or a home with an approved secondary suite, living in one part of the property and renting the other.
The rental income can help offset your monthly housing expenses while you own the property and build equity through mortgage principal repayment.
You don't need to already be a real estate investor to consider this strategy. For some buyers, their first investment property can also be their first home.
How Does It Work?
The idea is simple.
You purchase a property with two separate living areas. You live in one and rent the other.
For example, you might purchase a new duplex where you live in the main portion and rent an approved secondary suite. Another option could be a resale property with two approved dwelling units.
The tenant's rent doesn't make your home free. You are still responsible for the property and its expenses. But the rental income can help reduce how much of those expenses comes directly from your own pocket each month.
Real Winnipeg Example: New Duplex in St. Vital
Let’s look at a simple example of a first-time buyer purchasing a new duplex in St. Vital for $615,000 and living in the property while renting the secondary suite.
Estimated Purchase & Financing
🏡 Purchase Price: $615,000
💰 Minimum Down Payment: ~$36,500
For an eligible owner-occupied one- or two-unit property, the minimum down payment at this price is calculated as 5% of the first $500,000 plus 10% of the remaining amount. That gives us $25,000 + $11,500 = $36,500. CMHC currently allows up to 95% loan-to-value on qualifying owner-occupied one- and two-unit properties.
🏦 Base Mortgage: ~$578,500
🛡️ Estimated Mortgage Default Insurance: ~$23,140
With this down payment, the loan-to-value ratio is above 90%. CMHC’s current standard premium at 90.01%–95% LTV is 4%, which would be approximately $23,140 in this example. The premium can generally be added to the mortgage.
🏦 Estimated Total Mortgage: ~$601,640
📈 Example Interest Rate: 3.70% variable
📅 Amortization: 25 years
🏡 Estimated Mortgage Payment: ~$3,075/month
The rate and payment are examples only. Actual mortgage qualification, rate, insurance premium and payment will depend on the buyer, lender, mortgage insurer and product.
Estimated Monthly Costs
Using our example:
🏡 Mortgage Payment: ~$3,075/month
📋 Property Taxes: ~$400/month
🏠 Home Insurance: ~$110/month
💡 Hydro/Water: ~$300/month
Estimated Total Monthly Cost: ~$3,885/month
Now let’s see what happens when the secondary suite is rented.
Add $1,700/Month in Rental Income
Suppose the approved secondary suite could reasonably rent for approximately:
🏠 Estimated Rental Income: $1,700/month + applicable utilities
The simple calculation becomes:
$3,885 estimated monthly housing costs − $1,700 estimated rental income = approximately $2,185/month
In simple terms, the property may cost approximately $3,885 per month based on these assumptions, but $1,700 in rental income could help offset those costs.
That leaves approximately $2,185 per month before considering maintenance, repairs, vacancies and other expenses.
At the same time, you own the entire $615,000 property and are building equity as the mortgage principal is paid down.
That's what makes this strategy interesting.
First-Time Home Buyers Can Also Have a Major GST Advantage
If you're an eligible first-time home buyer purchasing qualifying new construction, there is another important benefit.
Canada's First-Time Home Buyers' GST/HST Rebate can provide eligible buyers with up to 100% of the GST or federal portion of HST paid on a qualifying new home valued at $1 million or less, up to a maximum rebate of $50,000. The benefit is gradually reduced between $1 million and $1.5 million. Applications are now open.
For a new $615,000 duplex, that could represent a significant benefit if both the buyer and property qualify.
However, don't simply calculate 5% of the advertised $615,000 price and assume that's your rebate. The actual calculation depends partly on whether the advertised builder price includes GST and how the transaction is structured.
CRA also has specific eligibility requirements. Among them, a qualifying home purchased from a builder generally needs to be intended as the buyer's primary place of residence, and the purchase agreement must fall within the program's applicable dates.
Confirm the actual rebate and how it will be handled with the builder, lawyer and appropriate tax professional before relying on it in your purchase calculations.
What Is an Approved Secondary Suite?
A secondary suite is an additional dwelling unit within or associated with a property that is subject to applicable municipal requirements and approvals.
It may have its own kitchen, bathroom, bedrooms or sleeping areas, living space and entrance arrangement.
One of the most important things for buyers to understand is this:
A basement with a kitchen is not automatically an approved secondary suite.
If rental income is an important reason you're purchasing the property, verify the available permits and approvals and complete appropriate due diligence before buying.
Don't rely only on a listing saying "basement suite," "in-law suite" or "income property."
What Is a Duplex?
A duplex generally contains two dwelling units within one property.
Depending on its design, the units could be side-by-side or arranged vertically.
For an owner-occupier, the advantage is straightforward: you may be able to live in one portion of the property while renting the other.
There are also newer Winnipeg homes designed with a main dwelling and approved secondary suite. The layouts, approvals, entrances, utilities and laundry arrangements vary, so each property needs to be evaluated individually.
Can a First-Time Buyer Do This?
Potentially, yes.
You don't need to already own rental properties to purchase an owner-occupied property with rental potential.
For qualifying owner-occupied one- and two-unit properties, CMHC permits financing up to 95% loan-to-value. Three- and four-unit owner-occupied properties have different minimum-equity requirements, so don't assume the same down payment applies to every multi-unit property.
Your mortgage professional should determine what you qualify for based on your income, debts, credit, down payment, intended occupancy and the particular property.
Can Rental Income Help You Qualify for the Mortgage?
Potentially.
Depending on the lender, mortgage insurer, property and financing program, some rental income may be considered when determining mortgage qualification.
However, don't assume the lender will simply take 100% of the expected monthly rent and add it to your employment income.
Rental income can be treated differently depending on the financing situation.
When getting pre-approved, tell your mortgage professional that you specifically want an owner-occupied duplex or home with an approved secondary suite. That allows them to evaluate your financing properly before you begin making offers.
What Makes a Good Home With Rental Potential?
Don't buy a property simply because it has two kitchens.
Look at the complete property.
Consider the location, purchase price, condition, layout, privacy between the units, separate entrances, parking, laundry, utility arrangements, realistic rent and future resale potential.
Most importantly, ask yourself whether you would actually be comfortable living in the property with a tenant occupying another portion of it.
A good rental property should also be a good home for you.
Separate Entrances Matter
Privacy is important for both you and your tenant.
A properly designed secondary unit should have an appropriate entrance arrangement. When comparing properties, look at how the entrance actually functions rather than simply seeing “separate entrance” in the listing.
If the tenant has to regularly walk through your private living area to reach their unit, the property may not provide the separation you expected.
Separate Laundry Is a Big Advantage
Separate laundry can make living with a tenant much easier.
If you and your tenant each have your own washer and dryer, there is less need to share space or coordinate laundry schedules.
When purchasing new construction, confirm whether separate laundry for the secondary unit is included or whether it costs extra.
Understand the Utilities
Utilities can significantly change the actual numbers.
Some properties have separate meters or systems for certain utilities. Others have shared utilities that the landlord includes in the rent or handles according to the tenancy agreement.
Before buying, understand who will be responsible for electricity, natural gas, water and other services.
A suite renting for $1,700 plus utilities is financially different from one renting for $1,700 with all utilities included.
Don't Forget About Parking
Parking is particularly important in Winnipeg.
Consider where both households will park and how the arrangement will work during winter.
Depending on the property, parking may include a garage, driveway, rear parking pad, street parking or a combination.
Good parking can also make the rental unit more attractive to future tenants.
New Construction vs. Resale
Both can work, but they offer different advantages.
A new duplex or home with an approved secondary suite may have been designed for this purpose from the beginning. Depending on the property, you may get newer mechanical systems, modern insulation, separate entrances, separate laundry and new-home warranty coverage where applicable.
Eligible first-time buyers purchasing qualifying new construction may also benefit from the federal GST/HST rebate discussed earlier.
A resale property may cost less or offer a more established location. The rental unit may already be completed and could even have a tenant.
However, with resale properties, you should carefully investigate permits, approvals, renovations, electrical and plumbing work, windows, entrances, heating arrangements and the overall condition of the property.
If There's Already a Tenant, Do Your Homework
Buying a property with an existing tenant is different from buying a vacant property.
Before purchasing, review the available information about the tenancy, including the rent, tenancy agreement, deposit and other relevant documentation.
Don't assume that purchasing the property automatically allows you to immediately increase the rent, change the agreement or require the tenant to leave.
Manitoba residential tenancies are governed by provincial rules, and both landlords and tenants have legal rights and responsibilities.
Your REALTOR® and lawyer can help you identify the information you should review, and Manitoba's Residential Tenancies Branch is an important source for tenancy requirements.
Becoming a Landlord Comes With Responsibilities
Receiving rent also means becoming a landlord.
You'll have responsibilities relating to the property, repairs, tenancy agreements, deposits, notices and other matters governed by Manitoba’s residential tenancy rules. Tenants also have responsibilities under their tenancy agreements and The Residential Tenancies Act.
Before renting your secondary unit, understand the basic rules rather than waiting until a problem occurs.
Manitoba Residential Tenancies Branch
Tell Your Insurance Company About the Rental Unit
Don't assume a regular homeowner's insurance policy automatically covers every rental arrangement.
Tell your insurance professional that you'll be occupying the property and renting another unit.
The appropriate coverage and cost will depend on the property and arrangement. Make sure you understand your coverage before the tenant moves in.
Rental Income Has Tax Implications
Rental income generally has income-tax implications.
There may also be eligible expenses associated with earning rental income, depending on your circumstances.
Keep proper records of rent received and relevant expenses, and speak with an accountant or tax professional about how the rental portion of your property should be reported.
Keep an Emergency Reserve
Don't spend every dollar you have on the down payment.
Owning a rental property means unexpected expenses can happen.
A furnace may need repair. An appliance may stop working. A tenant may move out and the suite could remain vacant while you find another tenant.
Keeping an emergency reserve gives you room to deal with these situations without immediately relying on credit.
What Happens If the Suite Is Vacant?
This is one of the most important questions to ask before purchasing.
Could you still make the mortgage payment and cover your basic expenses if you received no rent for a month or two?
If the answer is no, you may be stretching your budget too far.
Rental income can help tremendously, but your entire financial plan shouldn't depend on receiving perfect rent every month forever.
Don't Assume a New Build Includes Everything
When buying new construction, confirm exactly what you're getting for the advertised price.
Depending on the builder, items such as appliances, central air conditioning, landscaping, fencing, garage completion, blinds, basement finishes, separate laundry and other features may be included, optional or excluded.
Compare the complete package rather than simply comparing two advertised purchase prices.
Use Realistic Rent
Don't choose your expected rental income based on the amount you need to make the mortgage affordable.
Research comparable rentals.
Consider the number of bedrooms, size, location, parking, separate entrance, laundry, condition, utilities and included features.
If comparable suites are renting for approximately $1,500, don't build your financial plan around receiving $1,800 simply because the higher number makes the property affordable.
Conservative numbers usually lead to better decisions.
Rental Income Isn't Pure Profit
If your tenant pays $1,700 per month, that doesn't mean you're making $1,700 in profit.
You own the entire property and remain responsible for applicable expenses.
Depending on the arrangement, those expenses can include property taxes, insurance, maintenance, repairs, utilities, snow removal, yard maintenance and periods without a tenant.
That's why the $2,185 figure in our St. Vital example should be viewed as a simplified estimated net housing cost - not a guaranteed monthly cost.
Budget for Closing Costs Too
The $36,500 minimum down payment in our example isn't necessarily all the cash a buyer will need.
Depending on the transaction, buyers should also budget for items such as Manitoba land transfer tax, legal fees and disbursements, title-related costs, property tax adjustments, home inspection expenses, moving costs and other applicable closing expenses.
Before making an offer, ask your mortgage professional and lawyer to help you understand the funds you'll need in addition to your down payment.
Location Still Matters
Don't sacrifice location simply because a property has a rental suite.
Think about what future tenants may want: public transportation, employment areas, schools, shopping, parks, universities or colleges and other amenities.
Location also matters when you eventually decide to sell.
The goal should be to buy a good property first and then determine whether its rental potential makes the numbers even better.
What Should You Check Before Buying?
Before making an offer on a property because of its rental potential, understand:
- Whether the secondary unit is approved for its intended use
- What permits and approvals are available
- Realistic market rent
- Separate or shared utilities
- Laundry arrangements
- Parking
- Property condition
- Existing tenancy, if applicable
- Estimated monthly expenses
- How your lender will consider rental income
- What is included with new construction
- Insurance requirements
- Closing costs
- Your responsibilities as a landlord
- Whether you may qualify for applicable first-time buyer programs
Different professionals handle different parts of this due diligence. Your REALTOR®, mortgage professional, lawyer, home inspector, insurance professional and accountant can each help within their respective areas.
You Don't Have to Be a Big Investor to Start
When people hear "real estate investor," they sometimes imagine someone who owns ten or twenty properties.
It doesn't have to begin that way.
Your first step might simply be purchasing your own home with an approved secondary suite. You live in one portion and rent the other.
You learn what owning and managing a rental property
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