Real Estate Due Diligence Checklist for Canadian Investors 2025

Updated March 2025 • 11 min read

Due diligence is the process of investigating a property before removing your purchase conditions and committing to the sale. Rushing due diligence — or skipping it entirely in a competitive market — is one of the most expensive mistakes a real estate investor can make. This checklist covers everything you should verify before buying a Canadian investment property.

Financing Conditions: Get Pre-Approved First

Always include a financing condition in your offer unless you're genuinely buying with cash. Your pre-approval should have been obtained before making offers, but the specific property must still be appraised and approved by the lender. Conditions typically allow 5–10 business days for financing confirmation.

Home Inspection

Hire a qualified home inspector (look for CAHPI-certified or provincial equivalent). Key areas to assess:

• Foundation: cracks, moisture, settlement
• Roof: age, condition, remaining life (average asphalt shingle roof lasts 20–25 years)
• Electrical: panel capacity (100A minimum; 200A preferred for multi-unit), knob-and-tube wiring, aluminum wiring
• Plumbing: pipe material (copper vs. polybutylene vs. lead), water heater age, sewer lateral condition
• HVAC: age and condition of furnace, AC, heat pump
• Insulation and vapour barriers
• Windows and doors: condition, energy efficiency
• Basement: moisture, drainage, sump pump

Title Search and Legal Review

Your real estate lawyer will conduct a title search revealing:

• Registered encumbrances (mortgages being discharged)
• Easements (rights-of-way that may affect use)
• Restrictive covenants (use restrictions registered against title)
• Rights of way (utility, drainage, access)
• Tax arrears
• Property boundaries confirmed by survey (older properties may have survey issues)

Municipal Permit and Zoning Review

Contact the local municipality and verify:

• All suites are legal and permitted (request building permits)
• No outstanding work orders or violations
• Current zoning permits the intended use
• Development charges or levies on future plans
• Heritage designations that restrict renovations
• Conservation authority restrictions (if near floodplain, ravine, or wetland)

Tenant and Lease Review

For tenanted properties:

• Review all leases (lease term, monthly rent, what's included)
• Confirm current rent vs. market rent (below-market rents may represent both opportunity and limitation)
• Check rent payment history (ask for receipts or bank statements)
• Understand which tenants are month-to-month vs. on fixed-term leases
• Verify the tenants know about the sale (required notification)
• Review any side agreements or rent reduction arrangements

Financial Due Diligence

Request and verify:

• 12 months of actual rental income (bank statements, not just seller representations)
• Utility bills (12 months for each utility)
• Property tax bills
• Insurance history and any claims
• Capital expenditure history (what has been replaced and when)
• Condo status certificate (for condos): reserve fund health, pending special assessments, management company, ongoing litigation

Environmental Considerations

• Oil tanks: underground or above-ground heating oil tanks require inspection; decommissioning or remediation can be costly
• Asbestos: common in homes built before 1980 (flooring, insulation, ceiling tiles, pipe insulation)
• Lead paint: possible in homes built before 1978
• Mould: often indicated by moisture, water staining, musty odours
• Radon: Health Canada recommends testing; elevated levels require mitigation
• Phase 1 Environmental Site Assessment: for commercial properties or any property with suspected contamination history

Neighbourhood and Market Due Diligence

• Walk the neighbourhood at different times of day
• Research crime statistics (local police service data)
• Check proximity to amenities: transit, groceries, schools, employment
• Review comparable sales from the past 90 days (your REALTOR can provide)
• Check CMHC rental market reports for vacancy rates and rental trends
• Research any major planned development or infrastructure changes nearby

Your Due Diligence Timeline

1. Offer accepted → immediately book home inspector and notify your lawyer and mortgage broker
2. Days 1–3: Home inspection completed
3. Days 1–5: Lender receives the accepted offer and orders appraisal
4. Days 1–5: Lawyer begins title search
5. Days 3–7: Obtain and review tenant leases and financial records
6. Days 5–8: Review appraisal and confirm financing
7. Days 8–10: Remove conditions (or renegotiate/walk away based on findings)