Real estate investors


OWNERSHIP - should I own my real estate holdings personally or corporately?

The answer of course is it depends!

Below are a few of the factors that weigh in on whether a personal or corporate structure works best for you including:

  • what you and your significant other's other sources of income are & how much income you make in a year;
  • are you planning to have other family members; friends or business partners involved;
  • what exactly is your overall real estate investment plan & how diverse you wish your investments to be;
  • are your holdings active (i.e. are you flipping, doing buy & holds, or rent to owns) or passive (mortgage investments, land development) in nature;

It's always best to address these issues from the outset so you can determine what structure is best for you - if you would like to discuss your particular situation, please give us a call.

PURCHASE PRICE of rental property - isn’t it the price I paid for it?

You need to consider the following when recording your rental property purchase:

  • PURCHASE PRICE - The cost of a real estate purchase is not simply the price you buy it for – you must add land transfer tax, legal fees, inspection & appraisal fees to come up with the overall purchase price of the property.
  • REPAIRS – Many investors are surprised that a majority of major repairs to a property when initially purchased are considered capital in nature by CRA vs an “expense”.This can have significant impact on your returns in determining whether you will have a rental income or loss situation.
  • LAND vs BUILDING - You also need to allocate the overall purchase price between land and building ... why? Land is not depreciable but the building is … so make sure you have some documentation on hand as to how you came up with the land vs building value as CRA may challenge your allocation under an audit.

PERSONAL TAXES - how does having a rental property affect my tax return?

You would report the net rental income (or loss) of your property on your personal tax return. Any net rental income would be added to your other sources of income in the year & taxed at rates in effect at that income level. Similarly losses would be deducted from your other sources of income and reduce the taxes calculated at that income level.

Rental income includes rent from tenants as well as ancillary income from parking garages, laundry facilities and other sources.

The typical expenses that can be deducted include the interest portion of any mortgage payments (principal repayments are not deductible), property taxes, utilities, insurance, repairs & maintenance.

For additional information on a specific item either look at the rental income guide below or contact us to discuss your situation further.

TAX ON SALE - are there ways to minimize the tax I have to pay personally from a property sale?

Depending on your specific situation there may be a number of ways to minimize the tax impact on the sale of a property in a year.

A few of the factors that affect the ultimate amount of income taxes you owe when a property sale is included on your personal tax return include:

  • If you had closing costs on your sale such as realtor commissions, legal fees & other costs;
  • Whether the property you sold was held individually or jointly with others;
  • If you received cash on closing or took back a mortgage as part of the consideration;
  • The date on which the closing of the transaction happens;
  • What flexibly you may have to offset your gain with making RRSP contributions;
  • If you have capital losses from prior years which you can apply against the capital gain on your property sale this year;

Touch base with us to discuss the specific details of your situation.