BristolUK

I don't understand this objection to paying tax on a portion of a gain.

In selling the secondary property you have a liability at your tax rate on half of the gain. That means you keep half of the gain and pay a portion of the rest in tax. You still keep most of the gain.

My duplex went at a loss too (luckily the rental income more than made that up) but you can carry forward a negative if you sell another secondary property I believe.

DandNHill

Really? I wonder how long for?

scilly

I don't object to paying tax on a gain .............. but it is something that a newbie might not expect to do, especially if they were planning on using the secondary house(s) to provide for retirement.

3 years ago, our very good friend lost about $250,000 on the second house they built on the adjoining lot to their primary residence. That was on Vancouver Island.

Aviator

You can carry forward capital losses to offset future capital gains.

DigitalGhost

Well invest it wisely and you might get some or even all of your investment back. I'd be surprised if some people hadn't done extremely well out of that program as well as getting one of the easiest routes to US PR available out of it.

Winterdiva

We are both under 40. As plans currently stand, we'd like to hold the investment properties to provide us stable rental income for retirement (aged 60). So we'd like to buy in a good upcoming area and keep it for atleast 25 years.

Winterdiva

After carefully reading all the replies, I've revised the plan. Does it make more sense now?

Total Budget (remains the same) - 1.5M CAD

House to live in (min 4 bed, 2500 sft) : 1.2M CAD (Oakville, GTA)

Investment properties: 2 investment properties. 150k CAD down payment on each. Mortgage of 150k on each. Hoping to buy 2/3 bed freehold properties - not necessarily in GTA.

dbd33

Do I understand correctly that they sold the house for $250,000 less than they spent more on the lot and the cost of the build? That would be quite the miscalculation on a $500,000 house. I suppose it could be $5,000,000 house, in which case it's unfortunate but within the bounds of reasonable risk.

Or, do you mean that the profit on the house was such that, even after using their lifetime deductions, losses carried forward, safe income on hand and all other accounting tricks they still had so much money that they had to pay $250,000 in CGT?

In the latter case, this is a problems we should all have.

dbd33

I think you need an accountant. Someone to set things up so that, if the investments turn to dust, the loss has value to you and if they don't the profit doesn't vanish in tax. I know a man who can do that. I don't know what he would charge for general advice, hundreds, I imagine.

House price/suitability advice you can get here.

BristolUK

My account says T4037 includes Generally, you can apply your net capital losses to taxable capital gains of the three preceding years and to taxable capital gains of any future years.

Good point. The way I read your original comment about a huge tax bill just made me think how big can it be when it's much less than your gain...but if one had plans for the gain without knowing, yes it could scupper them.

Yes, it does seem any capital gains rather than similar transactions to that which gave the loss.

BristolUK

So two properties each for $300k.

Based on what others say that would be some way out. Do you plan on managing yourself or having a management company? Just thinking that there may be problems managing from a distance. My rental was only 30 minutes on foot, 10 minutes by bike or bus. Obviously by car is easier but in winter even that could be problematic if something needed you to be there, depending on timing of snow, ice storms, city plowed ridges across driveways etc.

Aviator

Well and truly glad I am not into property rentals anymore. It works great when you get a good tenant, horrible when you don't. End up with a grow op and it can be a nightmare. I never took pets, now there is a move in BC for the govt to legislate that a tenancy cannot be refused on the grounds of pets! At the moment it is getting no traction, but who knows. From an investment perspective, don't see any huge gains in property values coming up in the lower priced market, unless buying a fixer upper and fixing it up.

scilly

Our one-time neighbour rented out the house next door to us for almost 30 years ............. he had some very good tenants, he had others who were terrible. A couple caused major damage to the house before leaving, at least one did a midnight skip having not paid rent for at least 3 months.

One time, it took him over 6 months to get all the repairs done so that it could be rented out again ............... that was 6 months without any income.

I won't even mention the neighbour upsets caused by the renters who had regular fights, broke windows by throwing things through them, etc

The landlord lived less than 15 minutes away by car, and still couldn't keep a handle on it all.

scilly

It was due to the huge increase in value of the house, which was on 1 acre of land although within city limits. She had also made a large profit when selling her main residence a few months before. So the money lost was all in Capital Gains.

DandNHill

All the damage (substantial) to our properties has been caused by pets.

If we do buy a rental one day in Ontario it will have to be a condo for the over 50s that has bylaws banning pets. That’s the only way I would consider it.
It’s because of these shitty tenants that we have negative CGT on the properties we had.