…that is the question. Put to me by FT and his request that I try to address the issue.

First, and most importantly, I am not an accountant, tax lawyer, or anyone else who makes money off the misery of others.

Second, my current corporate structure has evolved over time and I do not advocate one way over the other. Smarter people than myself will tell you better ways to do it, but these are my observations.

My Portfolio

I currently own four properties as follows:

  1. My personal property – owned jointly by my wife and I. This is not relevant to the discussion, but just thought you should know.
  2. One mixed-use property – owned in my wife’s name. It is a old house in the downtown that is commercial first floor and has two residential apartments upstairs.
  3. One residential duplex – owned 50% by myself and 50% by my partner. It is a house that I purchased with my buddy when we were in university. At the time, we squeezed 7 guys into the place over three years and pretty much demolished it. Subsequent to graduation, we converted it into a duplex (basement apartment) and now rent to a grad student and a nice family who take care of it for us. Not the most efficient use financially, but definitely the best use from a PITA (Pain in the A**) factor. There is an identical house across the street and the landlord gets 8 girls in the place and takes in almost triple the rent we take in. However, he is there almost every other day and that is his full time job.
  4. One mixed-use property – owned by a corporation which in turn is owned 25% by myself, 25% by my wife, 25% by my partner and 25% by his wife. This is a multi-unit complex with 5 commercial units and 3 low-income apartments.

Our Structure

As you can see, I don’t have just one solution for any model.  Each scenario was dictated by the circumstances at the time of purchase. For example, the first property I bought in partnership with my university friend just began as joint owners on the deed. At the time (we were 18 and 19), the house was our only asset, and we were using the cash flow from 7 guys to pay the mortgage. We had accelerated the payments and paid the thing off in 12 years. Neither my buddy or I required the income from the house after we graduated, so we ploughed every dollar it made back into paying off the mortgage as soon as possible.

Once the house was paid off, we started looking at other opportunities together.  The last property on my list was discovered by my friend in my hometown.  We looked at the potential and decided to go for it. The decision to create a corporation was made purely from an organizational point of view, as opposed to any specific tax benefit.  We were able to set up a shareholders agreement and loan the money to the corporation to purchase the building.

Using a corporation like this, we are not eligible for the capital gains allowance on this corporation and we would be subject to the capital cost allowance recapture when we sell the property. However, we have plans to tear the building down and redevelop.  For us, the corporate model worked.  We have even discussed including the other house in the corporate structure and establishing ourselves as a REIT (real estate income trust), but that is long term planning.

Finally, putting the other property in my wife’s name was based on the fact that she had some money saved up and wanted to invest.  After our kids were born, she did not want to go back to work, so this allowed us to use her savings to create cash flow for her, and let’s us legitimately income split.

Property Management Company

We did create a second corporation to act as a property management company. The property management company creates active income and can be eligible for the capital gains allowance. There is a caveat to this. If a property management company makes its money solely from one source which would be related, it can be deemed ineligible.  There are a series of rules about this and this comment is only based on conversations I have had with my accountant on an informal level, so do your own homework.

Pros and Cons

It used to be that a corporation would protect you from liability in the case of claims.  However, that is proving to be less and less the case as directors and officers are drawn into lawsuits. The key is having the right amount of insurance.

The corporation has additional costs with the annual filings, but we also have an annual shareholders meeting (which we can deduct) and get a chance to have dinner and discuss the corporate plans with our friends.

While the corporation is financially strong, no bank is loaning on the basis of the corporation alone and thus any future loans/mortgages would still require personal guarantees from the shareholders.


Perhaps there is nothing to be concluded by how I have things set up. It does appear to be a bit of a hodge-podge of systems and can be a bit of a nightmare from an accounting point of view. The property management company basically handles all the transactions for all the properties and thus simplifies things. It also leads to some confusion as to when some properties may be in deficit verses surplus, but I try to keep a handle on cash flow on a monthly basis.

For the real estate investor readers out there, how do you have your business structured?

QCash is a young retiree and self made millionaire. He has built his net worth up to $1.5 million by the ripe age of 36.  QCash writes the occasional article for Million Dollar Journey to share in his experience of obtaining a large net worth at a young age.

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Thanks for the explanation QCash! Quick question, how much does it cost you to maintain a corporation in Ontario?

Interesting… thanks for sharing. I always had questions regarding incorporation. Of course it helps that you’ve partnered with someone who shares the same vision as yourself. The PITA factor has been the main reason I haven’t entered the student housing market (as you’ve described the house across the street) but I’ve always been fascinated by it.

Thank you for the timely post. With respect to having the rental property in your wife’s name, I’m assuming that any income generated is taxed at her marginal rate.

I am in a similar situation whereby a condo I am renting is in my name only. Given that my wife is in a lower tax bracket, I’m wondering whether it makes sense to transfer the property to her, have the tenants make out their rent to her, and take advantage of her lower tax bracket?

Actually, having your principal residence in your wife’s name is relevant if you own property personally since this is prudent creditor proofing strategy and protects the family house for any liabilities attaching to you.

One tax issue, if you start owing properties personally then incorporate, remember you generally cannot transfer the property to the corporation with triggering a deemed disposition and resulting capital gains.

Dan- depending on what jursidiction you live in, you have to inquiry whether transferring the property to your wife will result in property transfer tax and is eligible for spousal rollover. So factor that into your determining.

thanks for the insight

For some strange reason, the following page is only half-displayed?


“the landlord gets 8 girls in the place and takes in almost triple the rent we take in. However, he is there almost every other day”

This line way WAY too interesting to leave alone……..

Sounds like an interesting proposition, though.


Nicolas, it works for me, are you still having the same problem? What browser are you using?

DAvid, I thought the same thing when I read that. lol

We have a number of properties. None of which are owned in a corporation, but that is based on our investment strategy (taxed as a capital gain). Talk to a chartered accountant, lawyer, and other real estate investors who are doing the same thing. And do your own due diligence. This is only my opinion and for my style of REI.

Reasons Against
– your liability is very similar if not the same as in a sole proprietorship
– must spend money earned within the corporation
– lots of extra bureaucratic steps
– yearly costs for incorporation and accounting

Reasons For
– lower taxes for advanced short term real estate strategies flipping and lease-to-owns


It can’t just be a straight transfer, otherwise attribution rules may apply. With our case, at the time, my wife had cash for the down payment, so we could create the appropriate paper trail to justify her ownership.


My annual cost for having a corporation is essentially the cost of preparing and filing the T2 with my accountant.

I have to check on the annual filing fee because I think it just changed (and I have to do that shortly).


There are provisions for tranferring property to an incorporation through a special election provided that the corporation is held by the same owners of the property. There are even provisions for avoiding paying the land transfer tax in Ontario in those cases. I looked into this with my lawyer several years ago now and there was no immediate benefit. The rules could have changed since then.

It is possible to do the transfer in those instances at the ACB, so no gain or loss is triggered.


you have summarized the pros and cons better than my article. Thanks.

Q Cash

Q Cash: good piece of info to know. Did your lawyer quote you his fees for undertaking this type of election?


I didn’t get that far, but I have a good lawyer who is pretty reasonable on this sort of thing. A numbered company cost me about $1500 to establish (all fees in). The filing of the election would be done at that time, I am sure.


There is nothing hodge podge about your system. It just takes some getting use, too, because its foundations it is indifferent. Just as you have stated, accountants trying to draw it all down on paper will have a hard time doing so.

One mixed use property is something I am looking forward to doing in the future.

But you say it much better than I can :-) One other thing getting high ratio financing within a corporation is challenging. And the financing is still secured by your name anyways.

@ DAvid,

I agree, “the landlord gets 8 girls in the place and takes in almost triple the rent we take in.”

I had to smile at that one…


A good read and I appreciate the details in your post.
I would however, like to better understand from you, what types of income tax deductions you try and take advantage of, given the number of properties you manage. My wife and I have only one rental unit at this time, but given it’s tax season, I’d like to understand from you and your experience, if I’m really taking advantage of all the deducations I can.



This is a great post and very good discussions about the subject. It’s a question everyone always asks us as well!! I totally agree with @qmanrei ‘s summary of reasons for and against incorporating. Currently we hold all of our property in our own names. At one point we created an Ontario corporation but we encountered a couple of issues when we actually tried to buy properties in the corporate name. The first issue was with a triplex we bought in Toronto. We assumed the sellers mortgage and to do that the bank wouldn’t allow us to have the corporation as an owner.

The next issue arose when we were buying two preconstruction condo units in King West. The builder had a bank imposed limit on how many units they could presell to investors which meant the builder wouldn’t accept offers from corporations. The only option we had here was to buy in our personal names and then transfer to a corporation afterwards. Even then we had to personally guarantee our loans, and there weren’t any benefits. The transfer fees weren’t insignificant (I don’t remember what they were though) so we just held them in our own names once again. After that I don’t think we bothered to even try to buy in the corporate name anymore, but I am not sure as our next purchases were in BC so I can’t remember exactly.

After almost five years of having an empty Ontario Corp. we recently closed it because it was costing us a couple thousand dollars every year in fees and accounting charges. Until such time as our accountant or our lawyer says we need to put property in a corporation we’ll continue to hold it as is. All of our property is residential with no more than 3 units in any one building. My parents invest in commercial properties and buy everything in a corporation – however they still have to personally guarantee EVERY mortgage. They hold in a corp. for tax reasons.

It’s different for everyone though – and you should always get professional advice to suit your own situation.

Good stuff – thanks as always FT for bringing such great content to the web.


Even with one rental unit, make sure you remember to deduct mileage for going to collect the rent or make repairs. Everyone seems to forget that one.

If the tennants are paying utilities, you can pretty much just claim property taxes, insurance and any interest on a mortgage.

I always take advantage of the capital cost allowance, although there are some who say not to bother because you just get hit with the recapture when you sell. My feeling is that I would like to maximize cash flow now and I don’t know what my situation will be when it comes time to sell.


You have to have a great working relationship with your bank to make a corporation work for you in this field. Even then, you will have to personally guarantee any loan in this day and age.

The other issues are all valid, however it seems to me that with the condo situation you can write the offer “Julie Whatever (in trust for a corporation to be created later)” and at closing, simply get your lawyer to file the documents in the corporations name. I did that with a building I purchased for my business a few years ago. It might let you get around the limit rule.



I believe collecting rent is actually the one instance where Revenue Canada does not permit deductions.

However, travel to and from the rental unit counts in every other circumstance.


Just did a quick look up on the Quick tax help and you are able to deduct travel expenses for collecting rents if you own two or more units.

Which caused me to issue a big “whewww!!” :-)

Actually, if you get a bunch of post-dated cheques, you shouldn’t have to travel at all.

Q Cash

QCash – sounds like you’ve got a few ;)

I do always collect post-dated cheques, but just need to find more excuses to write off my car trips. But then again, spot-checks of the unit condition can be made frequently.

I’ve always wondered if there was any correlation among tenants willing to give a years worth of post-dated cheques and problems with payment (obviously some of those cheques could bounce). My second tenant just began there occupancy and I don’t forsee problems, compare this to my dad, and father-in-law. They have problems every month!

Hi Q,

At what point does it become worthwhile to have a corporation – in number or value of properties?

If you own it personally, you can use CCA to keep your taxable income about zero for many years. You can also income split if your spouse is in a lower tax bracket.

You can also do the Cash Dam to make your home mortgage tax deductible over time as a rental expense. If you always keep your mortgage high, then there will usually be little or no taxable income.

The eventual capital gain is not taxed at lower rates in a coporation. In fact, it is taxed at the a rate similar to the highest personal tax rate.

Considering that the corporation will cost you $1-2,000/year in accounting and tax costs, how many properties or in what conditions would a corporation become worth the cost?


Hi, I would like to know about this comment “you can do Cash Dam to make your home mortgage tax deductible as rent expense”

Thank you

This is a basic question. Assuming I obtained a mortgage for personal ownership of a condo for purposes of renting out. My goal would be to hold it for about 15-20 yrs, and have the condo mortgage paid off entirely via rental income. But I’m assuming the net rental income (minus all the deductions) is considered ?self-employment income, would be taxed the marginal tax rate (ie. 46.4%) before you could use it pay for mortgage. Would be difficult to have the mortgage paid off with such a huge chunk of the rental income cut.

If it was done via a corporation instead, is the rental income considered passive investment income and therefore taxed at 48.7% (ontario), along with RDTOH credit of 26.3%? Even with the RDTOH credit, still a huge chunk taxed away, doesn’t make it easy to pay off the mortgage.

I hate to tell you that this is considered a Capital Gain not income. Talk to your accountant. And you would pay about half the normal marginal tax rate.

You can also depreciate the property to negate the cash flow, but you would be taxed differently on sale. Build a good team first, to advise you appropriately. And again talk to your accountant.

I’m looking to become a landlord pretty soon, renting out a whole house that I inherited. I have been running some numbers and it seems that if you declare the rent as income, it’s hardly worth it! In my tax bracket, the government will take half. :(

I was curious….if you feel comfortable sharing….how many of you declare rent income as income?

If you do declare rent as income, are there any deductions that can be made to offset this?

Thank you!!

Tory, Check out this post on rental property income and tax deductions.

Question…for QCash and others:

What “value” do you claim on your tax return when travelling to and from the rental unit? I know you can claim mileage for a tax deduction, but how?

Do you put a fraction of the gas amount paid? Line # 9281 for Motor Vehicle?

e.g., 200 city-km in one calendar year = 1/2 tank of gas @ $ 0.90/L??

Thanks in advance,

Mark, I believe you can claim the car for rental properties only if you own more than 1 (maybe 2) units. Having said that, if you use the car for personal uses as well (as most do), you’ll have to keep a log of your km’s. So basically, you take the amount used for business vs the total amount for the year as a %. Add up all your car expenses (interest, gas, maintenance etc) for the year, then multiply it by the %.

Thanks FT!

If I understand what you’re saying correctly, I can claim a percentage (although small) of my TOTAL car expenses (loan interest, gas, maintenance, insurance etc.) for the year, as “business” for the rental unit.

That correct?

I’m keeping a log this year of my travel to and from the rental unit, so that should help me.

Talk to good accountant that works with real estate investors. They should be able to help you with the income gained from the property. Especially if you are in that tax bracket. If the CRA comes knocking nobody on the internet will be sitting down with you at the audit.

Great discussion guys….I have a few rental properties…and I am on the hunt for an accountant that deals with Real Estate Investors…Any recommendations guys??? Thanks!

Hey Guys,

Just trying to revive this post as it has some great information. I just have a question. My partner and I have started personally buying investment properties. We are reaching the LTV ceiling and could probably squeeze out another 200k or so before the bank stops giving us money. Would setting up a corporation help us to move forward? I know it was mentioned that we would have to guarantee every property we hold in the corp. but does that mean we would need to get approved the same way if we personally purchased each property?

Basically, I’m just wondering if setting up a corp. is the way to keep moving forward when we hit the LTV road block.

Any other ideas are greatly appreciated.



FT, do you have any updates on QCash? I’m curious as to what his current financial situation is and what he thinks of the current markets

Good question Dan. I’ll ping him to see if he’ll post an update.

Hey FT, I really love your blog. You keep me motivated to keep making my own progress.

I’m wondering if incorporating provides any advantages that are not available to standard co-ownerships or partnerships.

For instance, you cannot claim mortgage payments as a deductible in a co-ownership or partnership, but couldn’t a corporation claim them as an expense? Doesn’t it show up on the P&L of a corporation?

In my case my expense deductions don’t offset my income and so I’m stuck with taxable income on my personal return. If I count my mortgage payments, I’m incurring a loss.

Maybe it makes more sense for me to setup a corporation to avoid false net profit or even reduce tax burden by taking dividends from the corporation if it really is profitable.

Am I on to something or am I missing something important?

Hi! My Wife and I own some Income Propertys in Ontario .now we would like to include our Sons, which will trigger Capital Gains. would it be better if we incorporated the Partnership before transfering into a Trust with our Boys to lower C. G.?
I appreciate any little Help!
Paul L.