Passive Income

Discover how passive income is earned through Canadian real estate, what properties generate it, and how to manage risk and maximize returns.

Passive Income
Escrow – Definition, Meaning, and Examples in Canadian Real Estate

May 22, 2025


What is Passive Income?

Passive income refers to earnings generated with minimal day-to-day involvement, often from rental properties or real estate investments.

Why Passive Income Matters in Real Estate

In Canadian real estate, passive income is a major incentive for owning income-generating properties. Landlords and investors earn monthly cash flow while the property potentially appreciates in value.

Common sources of passive income include:
  • Residential or commercial rent
  • Real Estate Investment Trusts (REITs)
  • Short-term vacation rentals
  • Ground leases or land rental agreements
Properly structured passive income allows for long-term wealth building, financial flexibility, and diversification of income streams. However, it still requires active planning:
  • Property management or hiring professionals
  • Maintenance, repairs, and legal compliance
  • Understanding tenancy laws and vacancy risk
Real estate investors must also consider tax implications, such as declaring rental income and managing deductible expenses. Leveraging mortgages and capital appreciation can enhance returns.
Understanding passive income empowers individuals to build equity, reduce financial dependence on employment, and plan for retirement through real estate.

Example of Passive Income

An investor earns $1,200/month in net passive income from a duplex after covering mortgage payments, taxes, and maintenance expenses.

Key Takeaways

  • Income with low day-to-day effort.
  • Commonly earned through rental real estate.
  • Supports long-term wealth generation.
  • Requires planning, upkeep, and compliance.
  • Must be reported as taxable income.

Related Terms

  • Rental Property
  • Cash Flow
  • Real Estate Investing
  • REIT
  • Taxable Income

Additional Terms

Public Realm Improvements

Public realm improvements are enhancements to public spaces such as sidewalks, parks, plazas, and streetscapes, often funded or contributed by. more

Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident,. more

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