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In Canada, Is It Better to Own Real Estate Privately or Through a Corporation, and Why?

There are two ways of purchasing real estate in Canada; you can either buy property privately or through a corporation. Buying through a corporation means that the property's title is in the name of the corporation and not a personal name.

So, which is the best strategy? To answer this question, let us look at the advantages of each approach.

Pros of owning property through a corporation

  • Protection of limited liability When you purchase real estate under a corporation, your commercial assets remain separate from your personal assets. In the event of risk liability, your personal assets will be protected

  • Tax benefits If you buy a home through a corporation, you will only pay a 50.2% tax on any capital gains or rent earned from the property

  • Estate freezing and succession planning If you wish to minimize your real estate taxes and easily bequeath your estate to your loved ones, buying property under a corporation is advisable.

Pros of owning property privately.

  • Avoid costs of setting up a corporation When you register a corporation, you will incur costs like name search fees, incorporation fees, accountant fees and lawyer fees. For example, incorporating a company in Ontario costs about $300. Selling privately saves you the time and cost involved in creating a corporation

  • Principal residence exemption One of the main advantages of buying Canadian real estate privately is the ability to take advantage of a principal residence exemption on the home’s value appreciation. This means that you will not be required to pay any tax on any gain earned from the sale of your principal residence. Unlike individuals, corporations are not eligible for a principal residence exemption. Therefore, owning a home through a corporation means that you will have to pay tax when you sell.

  • Easy access to financing Many mortgage brokers avoid working with corporations because it requires a lot of time and is more complicated. Even if you qualify for a loan, your corporation is likely to be charged a higher interest rate and higher down payment. Getting a mortgage privately is much faster and easier. You will pay better rates and a lower down payment compared to corporate mortgages.

When it comes to owning real estate privately or through a corporation, the decision is yours. Weigh the pros and cons and determine which approach works for you. If you need professional advice on owning real estate, get in touch with Regalway Homes.


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