Investment Property
Understand what investment property means in Canadian real estate, how it generates income, and what tax and financing rules apply to investors.
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
An overview of Hedge Road Landing. (Alliance Homes)
6525 Mississauga Road and its surrounding context. (RBC Capital Markets & CBRE)
Property details for 6525 Mississauga Road. (RBC Capital Markets & CBRE)
National average resale-price growth and housing-starts growth, smoothed over three months. The comparison illustrates the cycle; it does not establish how much a price change causes construction to change.
Trailing 12-month starts in centres of 50,000 or more remove the usual monthly seasonality. Ownership combines the homeowner and condominium categories; rental is shown separately.
Six-month averages of provincial starts, expressed at annual rates. The smoothing reduces the influence of individual apartment projects.
The same August benchmark compared with two different starting points. Three-month changes are not annualized.
Average sale prices show the difference in purchase costs across markets. They do not measure affordability relative to local incomes or construction costs.
Newfoundland and Labrador remains above its pre-pandemic sales pattern, but August activity was below last year. Historical lines retain their original release vintages.
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
Highlights from the Delta Golf & Country Club listing brochure. (Colliers)