Whether you're a first time investor, or a seasoned investor, we will go through some of the most basic concepts of structuring your investment portfolio and outline some of the more advanced taxation concepts all investors should be aware of if they plan on growing a large real estate portfolio.
The saying is true, "There are two things you can't avoid in life, death and taxes". Tax is something you can't avoid, but you can plan for it and use taxation law to your advantage in order to optimize the return of your real estate portfolio. As time passes, government regulation continues to close more tax loopholes which have bridged gaps in personal and corporate taxation strategies in order to create a more balanced taxation system regardless of the income source.
For the information provided we will assume that you're looking to build a long term property portfolio which is comprised of multiple property holdings and potentially other investment assets.
- Understanding the use of an Operating Company (OpCo) and Holding Company (HoldCo).
- Understanding Deductible and non-deductible expenses of income properties.
- Understanding your assets Adjusted Cost Base (ACB)
- Understanding asset deprecation using Capital Cost Allowance (CCA) and the remaining Undepreciated Capatial Cost (UCC)
- Understanding implications of Capital Cost Allowance Recapture and how it will impact your Capital Gains/Losses
- Understanding the function of a Capital Dividend Account (CDA) and Eligible / non-Eligible dividends.
Growing your Real Estate Portfolio:
You might already have a few investment properties in a holding company making a healthy rental income. If you're not taking those profits, you might be thinking about expanding into other investments to help diversity your overall investment portfolio.
- Understanding a Home Equity Line of Credit (HELOC) to leverage your purchasing power.
- Understanding Refundable Dividend Tax on Hand Credit (RDTOH) to buy shares or invest in other non-arms length companies.
- Understanding a Real Estate Investment Trust (REIT) and if it's right to diversify your investment portfolio.
Time to sell your real estate portfolio or a portion of it:
It's been many years now and you've built up an extremely profitable portfolio, it might be time to retire or you just want to sell some of your shares to expand your business to other investors.
- Understanding Lifetime Capital Gains Exemption (LCGE)
If you're a foreign investor, some slightly different taxation rules apply which you should remain aware of when structuring your real estate portfolio.