Consumers
Students
Ways to invest
Buy a house, live in it, possibly spend some time and money improving it, and sell it later at a profit
Buy income property (such as an apartment block or a commercial building) and rent it out
Buy land and hold it until it rises in value
Advantages
Excellent protection against inflation
Disadvantages
Can be difficult to convert into cash
It's a specialized type of investment that requires study and knowledge of the market
Capital gains
If you're venturing into real-estate investing, you need to brush up on the concept of capital gains.
Capital gains are profits realized from the sale of a capital asset such as a share, bond or real estate (if the real estate is not your principal residence). If a share is bought at $26 and sold at $30, there's a capital gain of $4. These profits are tax-deferred, which means you don't have to pay the tax on them until the asset is sold.
In 2000, the Government of Canada reduced the capital-gains inclusion rate from three-quarters to one-half. The inclusion rate is the portion of a capital gain that is subject to income tax. As a result, Canada's typical top tax rate on capital gains is now about two percentage points lower than in the United States.
If you buy property for the sole purpose of renting it out (rental property), you will be required to pay capital gains tax if there is a capital gain on the property. For instance, if you bought property for $200,000, and at the time of sale, it is worth $250,000, you will be taxed on the $50,000 gain on the property. If however, you are selling your principal residence, and make a profit on the sale, you will not be subject to capital gains tax.
