Incorporating Your Rental Property Business
| | | | | |

Incorporating Your Rental Property Business: Should You Do It? Here’s the Scoop

ByStan S.

So, you’ve finally taken the plunge into real estate, or maybe you’ve been collecting those sweet rental checks for a while. Either way, one question keeps popping up:

Should I incorporate my rental property business, or keep it under my personal name?

You’ve probably heard stories about big tax savings and bulletproof liability protection—but is that really the case for you?

Let’s peel back the layers and see what incorporation actually means, and whether it’s worth the paperwork, fees, and added complexity. By the end, you’ll have a clearer picture of what could work best for your situation (and hopefully a lot less confusion). 🏡💼

1. Taxes: The Good, the Bad, and the “Wait, What?”

📊 Personal vs. Corporate Tax

🔹 Personal Ownership: If you own property under your name, any rental income is taxed as part of your personal income. If you’re already in a high tax bracket (which can easily hit 45% or more in Canada), that’s a hefty bite out of your hard-earned rental income.

🔹 Corporate Ownership: If your company is a Canadian-controlled private corporation (CCPC) and your income qualifies as active business income, you might enjoy a lower tax rate (roughly 12–15% on the first $500,000).

  • The Catch: Rental income is usually deemed passive unless you own multiple properties (typically at least five) and have employees managing them. Passive income in a corporation often faces taxes closer to 50%.

🕒 The (Potential) Tax Deferral

A key perk of incorporating is that you pay personal tax only when you take out money as salary or dividends. If you’re aiming to reinvest profits (e.g., buying more properties), keeping income in the corporation can delay your personal tax bill, giving you more capital to expand faster.

💡 Quick Example:

  • Personal Income: If you earn $200,000 in net rental income, you could pay around $92,000 in taxes (46% rate).
  • Corporate Income: If taxed at 50%, you’d owe $100,000.
  • Tax Deferral Perk: Keeping the remaining $100,000 in the corporation lets you build funds to reinvest. The downside? When you eventually withdraw the money, you’ll still pay tax on dividends or salary.

💰 Losses and Write-Offs ✔ Personal Ownership: Rental losses (from renovations, vacancies, or depreciation) can reduce your overall personal income tax.
✔ Corporate Ownership: Losses stay within the corporation—you can’t offset your personal salary with corporate losses.

2. Liability: Protecting Your Nest Egg 🛡️

⚠️ Personal Ownership = Personal Risk

Imagine a tenant has a nasty fall and sues for $1 million. If the property is in your personal name, your personal assets (home, savings, investments) could be on the line if insurance doesn’t cover everything.

🏢 Corporate Ownership = A Safety Bubble (Kinda)

🔹 A corporation creates a legal separation between your personal assets and your rental properties.
🔹 However: Most lenders still require personal guarantees on mortgages, so liability protection isn’t always bulletproof.

3. Costs and Complexity: There’s No Free Lunch 💸

🔹 Formation Fees & Legal Costs: Setting up a corporation can cost a few thousand dollars.
🔹 Ongoing Accounting: Corporate tax returns, financial statements, and legal filings can cost a couple thousand per year.

📑 Extra Paperwork Galore

  • Annual corporate records, shareholder agreements, and legal compliance.
  • If you own just one or two properties, incorporation might be more trouble than it’s worth.

4. Long-Term Vision: Estate Planning & Beyond 🏦

📜 Easier Estate Planning

✔ Instead of transferring properties individually, you can transfer corporate shares, which may reduce probate fees and make succession planning smoother.

🚨 Watch Out for Capital Gains

❗ Moving a personally owned property into a corporation may trigger capital gains taxes immediately. Consult a tax expert before making a move.

💡 Example:

  • If you plan to gift rental properties to your children, transferring corporate shares can be cleaner than handing over individual deeds.

Should You Incorporate? The Verdict 🤔

✅ Go for Incorporation if:
✔️ You have (or plan to have) multiple properties generating significant income.
✔️ You reinvest profits rather than taking them out right away.
✔️ Liability protection is a key priority.
✔️ You’re thinking about estate planning or succession.

❌ Skip Incorporation if:
🚫 You own just one or two properties with modest rental income.
🚫 You rely on rental income immediately for personal expenses.
🚫 You don’t want the extra fees, accounting work, and legal complexities.

🏁 Bottom Line

There’s no one-size-fits-all answer. If you’re scaling up or need extra liability protection, incorporation might be a smart move. But for small landlords, the added cost and complexity may not be worth it.

🎯 Your best bet? Talk to a tax advisor or financial planner who can tailor a strategy to your specific situation.

At the end of the day, incorporation isn’t just about taxes—it’s about how big you want to grow, how much personal risk you can tolerate, and how you plan to structure your future.

Now that you know the pros and cons, you can confidently map out the next step in your real estate journey. 🚀

Share this page

Similar Posts

  • | | | | | | | | | | | | | | | |

    The Truth About Real Estate in the News

    ByRose Ho

    Myth #2: Put Less Than 20% Down So Banks Will Give You Better Rates Some mortgage brokers and lenders have perpetrated an enormous lie. They have suggested that if buyers purposefully use a smaller-than-average down payment and pay for CMHC mortgage insurance (which is mandatory for down payments under 20%), banks will perceive these loans as “safer” and offer these buyers a much lower interest rate on larger loan-to-value ratios. This is wrong. Banks are not solely looking at down payment sizes to determine the lending rate they will offer you. They look at your income, credit history, and debt-to-income ratio, getting a comprehensive view of your financial status and ability to repay your loan over time. Any “risk” they face of you being unable to pay your loan is offset by the home value itself, not by CMHC insurance. If you don’t pay your mortgage, they have the right to sell your property under a power of sale and recoup their losses. In this way, the bank is always protected from default risk. If you do not need to pay for CMHC insurance, avoid it because it will add to your monthly costs and provide no additional benefit to you. You can do the math: if you were to put less than 20% down, you would have to pay CMCH insurance, which ranges from 0.60% to 4.5% plus tax, which adds thousands of dollars to your housing costs. The only reason someone would push you to put less than 20% down when you have the funds to put 20% down is that they are getting some sort of benefit from it, not you. Mortgage brokers are paid based on the loan size you sign up for, so if you request a 90% loan instead of an 80% loan on a $500,000 property, they will get paid more. The lender, too, will gain more over time as you pay them more interest on your larger loan. Despite this misinformation controversy, the CMHC does offer a great program to help buyers who have less than a 20% down payment break into the market earlier. However, you should use it with a full understanding of the long-term costs. Ultimately, if you have more money to put down, you should definitely do it instead of paying extra fees like CMHC insurance. However, there is one important exception to note. You can get lower rates for investing in multifamily homes (with 5 units or more) that are insured by the CMHC. Typically, for buildings with more than 5 units, you would need a commercial mortgage and a larger down payment, like 25% down, but the CMHC offers preferred rates for eligible multifamily home projects. One specific program, the CMHC MLI Select Program, allows you to receive a lower interest rate than regular residential and commercial rates with less money down while still giving you the power of leverage. This program is available to help build the type of multifamily housing Canada needs the most: affordable rentals, student housing, and retirement housing. The CMHC MLI Select Program allows you to invest in multifamily buildings with only 5% down and offers extended amortizations for up to 50 years and reduced interest rates.

    Share this page
  • | | | | | | | | |

    Surprising new indicator of B.C.s sluggish real estate market

    ByAmy Judd

    Call it a sign of the times? “There are so many listings right now in the Metro Vancouver area that there’s not enough signposts,” Kaitlyn Herbst, realtor with MRKT Real Estate Group said. “The company is actually offering, if we take down the signpost, if it’s already sold property and give them their signpost back so that they can use it for a new client, they will give us money back on our next signpost.” Herbst said in April there were more than 15,000 listings in the Greater Vancouver area. “That’s a lot of signs,” she said. “I mean, condos don’t always have signs and stuff, but buyers, they’re just not showing up. They’re a little bit uncertain with everything that’s going on and kind of taking a little more time to look.” Story continues below advertisement 2:07 Metro Vancouver condos sitting empty amid housing crisis Real estate experts say it has been an interesting start to the year in Greater Vancouver. “What we expected to happen was the market to be a little more active than what we’ve seen so far,” Andrew Lis, director of economics and data analytics at Greater Vancouver Realtors, told Global News. Get breaking National news For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen. “Our forecast called for some growth in sales for the year, but sales have come in pretty slow since the beginning of the year.” Lis said it could partially be due to the uncertainty brought about by U.S. President Donald Trump’s tariffs, the political uncertainty around the Canadian election and the federal government’s overall housing strategy plan. “So it could be a number of factors keeping buyers on the sidelines, but things have been sort of quiet on the buy side,” Lis said. Story continues below advertisement “On the sell side, we have a lot of people coming to market with their property. So we’re actually at a point right now where we have some of the highest levels of inventory we’ve seen in almost over a decade. So a really interesting time right now for the market.” Lis said that sales are down about 24 per cent year-over-year. “They’re hanging below our 10-year seasonal averages, you know, around 20, 30 per cent. They’ve kind of been around those levels for some time.” Lis said that the market started to pick up late last year but has been slower in the first part of 2025. “On the inventory side, however, what we’ve seen is a pretty significant increase in inventory levels in our region,” he added. “Our inventory level in the Greater Vancouver region that we track at our board has surpassed the 16,000 mark, which we have not seen in over about a decade.” Trending Now 4:55 New cabinet role puts former Vancouver mayor back in the spotlight Lis said that for buyers, it’s a good thing as there is finally some choice across the board — condos, detached houses and townhouses. Story continues below advertisement However, they have seen more sales of detached homes than attached or apartments. “Generally, price trends have been fairly flat over the past few months and even actually over the last couple of years,” Lis said. “There’s some very small minor ups and downs — a per cent here, up, down a per cent there — but generally the price trend has been flat and that’s been pretty much true across all product types.” Herbst said she has never seen a market like this. “When a couple years ago there was no subjects, you were buying places, sight unseen,” she said. “I had clients buy homes I had never actually seen. Subject free, all that. Now we’ve got, ‘Okay, we’ll come back and see you a second time’.” Herbst said there are even sellers adding incentives to lure in prospective buyers. “There is one home (in Langley) that is for sale that the realtor is offering a Disney Cruise to the buyers of this family home. A four-person Disney cruise,” she said. “It’s not cheap, but it’s a way to make it stand out. It’s a way to get those families through the door. And there’s a lot of options for those buyers. So it’s comparing apples to apples, but this one I get to go on a trip with my family.” &copy 2025 Global News, a division of Corus Entertainment Inc.

    Share this page
  • | | | |

    Listings of Metro Vancouver Vacant Land and Building Lots ubdated by the hour.

    ByStan S.

    Stan Direct: 604-202-1412E-mail: ssteam3000@gmail.com Click the first two links below to view the MLS® listings of Vancouver Land and Building Lots, constantly updated every 1-2 hours. Play with the searches. Sort the listings by clicking the description at the top of each column. Click on the SOLD properties to see their actual selling price. Click on each property…

    Share this page
  • | | |

    Refinancing Versus Selling Your Investment Property

    ByRose Ho

    In today’s news, it’s common to hear stories about Canadian real estate investors who bought at the market peak a few years ago and now feel buyer’s remorse as property values are sinking in 2025. Even investors who entered the market earlier than 2022 are struggling to shoulder higher carrying costs against a less-active rental market. Mortgage, credit card, and automobile delinquencies are also up, especially in Ontario. On top of this, the average non-mortgage debt for Canadian consumers climbed up 2.74% in the first quarter of the year to reach $21,859. With many homeowners under financial stress, investors may be considering their options, namely to hold, to refinance, and (as a last option) to sell. Costs of Refinancing vs. Selling To help illustrate the costs of refinancing versus selling, let’s take one example of an investor who currently owns a two-bedroom condo in Downtown Toronto, which he is renting out. This property is currently worth $800,000, which is a bit devalued from the market peak 3 years ago. He has owned it for a while, so his mortgage loan is only about $400,000. His carrying costs are high because he renewed his mortgage term when interest rates were around 5%, but he is nearing the end of his term and interest rates are much lower. His daughter is about to go to college, so he wants to help her cover her tuition and living expenses. Therefore, he is considering refinancing or selling his condo investment property to reduce his monthly financial burden and have extra funds to help his daughter. Let’s look at the cost breakdown of both options. Refinancing Selling Appraised Home Value $800,000 Current Mortgage Loan $400,000 Cost to Refinance or Sell (agent/broker fees, mortgage penalty, legal costs) $2,000 $50,000 Capital Gains Tax N/A $92,000 New Mortgage Loan $600,000 N/A Money Extracted Minus Costs $198,000 $257,000 In the short term, selling can provide more value for this investor, as the difference between refinancing and selling is an estimated $59,000 in cash. However, this is just a quick estimate and a shallow glance at the immediate effects of selecting either option. What happens when we look deeper and project into the future? Why Selling Could Cost You More Than You Think Once you sell, you give up the three pillars of real estate wealth: leverage, capital appreciation, and cash flow. The moment you sell, it all stops—no more equity growth, no more rental income, no more long-term gain. It ends right then and there. But when you refinance instead, you get the best of both worlds: ✅ Immediate access to cash to help you now ✅ Continued growth on your $100,000 investment Over the last 25 years, home prices have appreciated at an average rate of 7.5%. Even at a conservative 4% annual growth, if your property is worth $800,000, that’s $32,000 a year in equity gain—without lifting a finger. And that’s on top of your tenant paying down your mortgage and generating monthly cash flow. If you keep that property for another 15 to 25 years, the wealth potential multiplies. We’re not talking about a one-time gain of $257K. We’re talking about 10x that amount — while still holding the asset, benefiting from appreciation, and using someone else’s money (your tenant’s) to build your net worth. Refinancing keeps your wealth working. Selling shuts it down. What Are Your Long-Term Goals? Both refinancing and selling can help this investor achieve his immediate objectives: reducing his carrying costs and sending his daughter to college. However, in the long run, they will deliver different results. Therefore, it is crucial for any investor to keep their long-term goals in mind. Short-Term: Reduce Current Debt and Financial Strain If you are currently under the weight of heavy debts (including multiple mortgages, credit card debt, or other loans) and your carrying costs are growing out of hand, you may consider selling your property to tackle both of these problems at once. The net proceeds of selling your real estate investment can help you pay off other debts while immediately removing that property’s carrying costs from your monthly ledger. However, if your situation only needs a slight adjustment to be sustainable again and borrowing rates have dropped, refinancing your high-interest fixed-rate mortgage may be just what you need to carry on. By refinancing and getting a lower interest rate while extracting some optional extra cash, you may be able to lower your monthly costs and improve your cash flow to cover other expenses. You should still weigh the refinancing option against the qualifications you may need to apply for a new mortgage and the penalty of breaking your current mortgage agreement. Not everyone’s situation may allow them to refinance, as lenders will look at your debt ratios, which may have worsened since you last applied for a mortgage. Additionally, if you are near the beginning of your mortgage term or have a closed agreement, breaking your current mortgage may be extremely costly. Long-Term: Use The Equity to Spend or Invest More Refinancing offers an attractive avenue for you to extract cash equity without incurring the many expenses of selling your property. The cost to refinance for some can be quite minimal, as some mortgage brokers offer cashback incentives to cover legal fees. The equity you withdraw is not subject to capital gains tax either, which would otherwise take a huge bite out of your

    Share this page
  • | | | |

    Repairs, Renos, or Red Tape? Making Sense of Rental Property Expenses in Canada

    ByStan S.

    Picture this: You’ve just picked up the keys to your dream rental property. It’s not perfect—yet. There’s a leaky faucet, the floors look tired, and the kitchen hasn’t been updated since disco was cool.  Naturally, you’re itching to whip out your toolkit (or your contractor’s phone number) and make it shine. But before you dive…

    Share this page
  • | | | | | |

    I can’t pay my mortgage, what are my options?

    ByStan S.

    Alternative payment arrangements when facing financial difficulties. Unforeseen financial circumstances happen. Sometimes, they affect your ability to make regular mortgage payments. The good thing is that you have options. It’s important for you to take quick action quickly. If you can’t pay your mortgage, you need to get in touch with your mortgage professional at…

    Share this page