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Investment Property

Understand what investment property means in Canadian real estate, how it generates income, and what tax and financing rules apply to investors.

Investment Property

May 22, 2025


What is an Investment Property?

An investment property is real estate purchased with the intention of generating income or profit, rather than being used as a primary residence.

Why Investment Properties Matters in Real Estate

In Canadian real estate, investment properties can take the form of rental homes, condos, duplexes, or multi-unit buildings. Investors purchase these properties to earn rental income, benefit from appreciation, or both.

Unlike a principal residence, investment properties are subject to capital gains tax upon sale, and rental income must be reported for tax purposes. Owners can, however, deduct certain expenses—including mortgage interest, property taxes, maintenance, and depreciation—to offset rental income.

Lenders often require larger down payments (typically 20% or more) for investment properties, and mortgage rates may be higher due to increased risk. Investors must also be prepared for vacancy periods, repairs, and property management duties.

Successful real estate investing requires understanding market trends, zoning rules, landlord-tenant laws, and financial planning strategies.

Example of an Investment Property

A buyer purchases a duplex in Hamilton and rents out both units. The monthly rental income exceeds the mortgage payment, generating positive cash flow.

Key Takeaways

  • Purchased to generate income or profit.
  • Subject to specific tax rules and regulations.
  • Requires a larger down payment and careful financial planning.
  • Offers potential for appreciation and cash flow.
  • Can be held short- or long-term depending on investment goals.

Related Terms

  • Principal Residence
  • Capital Gains Tax
  • Rental Income
  • Landlord
  • Cash Flow

Additional Terms

Budgeting

Budgeting in real estate refers to the process of forecasting and managing income and expenses associated with owning, operating, or developing a property.. more

Tenant Improvements

Tenant improvements refer to custom modifications or build-outs made to a leased space to suit the tenant’s operational needs, often negotiated as. more

Highest and Best Use

Highest and best use refers to the reasonably probable use of a property that results in the highest value, provided it is legally permissible,. more

Gross Lease

A gross lease is a commercial lease where the tenant pays a fixed rent, and the landlord covers most or all operating expenses such as property. more

Brownfield

A brownfield is a property that was previously used for industrial or commercial purposes and is now vacant or underused, often requiring. more

Record of Site Condition (RSC)

A Record of Site Condition (RSC) is a formal document filed with a provincial environmental authority certifying that a property meets required. more

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