Real estate is one of the most popular wealth-building tools in Canada. Used well, it can generate income, long-term capital gains and diversification of your net worth. But like any investment, it carries risks that must be understood.
Why real estate?
- Leverage: a relatively modest down payment lets you control a high-value asset.
- Rental income: rents that can cover costs and generate a surplus.
- Appreciation: potential long-term increase in value.
- Diversification: a tangible asset that behaves differently from stock markets.
Possible strategies
- Principal residence: the principal residence exemption shields the capital gain from tax.
- Income property: buying a duplex, triplex or multi-unit building to generate rents.
- Real estate through registered accounts: investing in real estate funds inside a TFSA or RRSP, without managing a building.
Risks to consider
Real estate requires capital, liquidity and management: interest rates, rental vacancy, maintenance, taxes and regulation. A portfolio too concentrated in property can also reduce diversification. Before investing, assess your financial capacity, your investment horizon and your risk tolerance — ideally within a comprehensive financial plan.
Questions about your situation?
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Book a consultationFrequently asked questions
No. Profitability depends on the purchase price, financing, the rental market and maintenance costs. Rigorous analysis is essential before any purchase.
Yes, indirectly, through real estate mutual funds or ETFs held in your registered accounts. It's a way to gain real estate exposure without managing a building.
For an owner-occupied property, the minimum down payment can be 5%, while a rental property often requires 20% or more. Every situation is different.