You’ve got a few rental properties. Cash flow is solid. You’re starting to think bigger. And now the question hits: should you hold these properties in your personal name, or is it time to incorporate?
This is one of the most important structural decisions you’ll make as a scaling investor. Real estate holdings in a corporation vs personal name — get it right and you set yourself up for decades of tax-efficient growth. Get it wrong and you’re looking at unnecessary tax bills, financing headaches, and legal exposure you never saw coming.
I’ve seen investors on both sides of this. Some incorporated way too early and spent thousands a year on accounting fees that ate into thin cash flow. Others waited too long and left tens of thousands in tax deferral on the table. Let’s walk through the decision framework so you can have a productive conversation with your accountant, your lawyer, and your mortgage broker.
This is your comprehensive guide to WHEN and WHY to choose different ownership structures. If you’re ready to incorporate and need tactical steps, see our Rental Property Corporations: Portfolio Guide for setup and compliance details. If you’re still deciding whether incorporation makes sense for your situation, read our focused analysis on Rental Property: Corporation vs Personal Name which breaks down the core decision factors.
Personal Ownership: Where Most Canadian Investors Start
Most Canadian investors start by holding properties in their personal name. And there’s a good reason for that. It’s the simplest path, and it gives you the widest access to lenders and the best mortgage terms.
Why Personal Ownership Works
You get better financing. When you apply for a mortgage personally, you have access to the full range of A lenders, B lenders, and credit unions. You get the most competitive rates and the smoothest approval process. Lenders underwrite you based on your personal income, credit score, and existing debts. Your gross debt service (GDS) ratio — the percentage of your income going toward housing costs — needs to stay at or below 39%. Your total debt service (TDS) ratio — all debts combined — needs to stay at or below 44%. Investment properties require a minimum 20% down payment, and the mortgage stress test qualifies you at the greater of 5.25% or your contract rate plus 2%.
Tax filing stays simple. You report rental income on your personal tax return using a T776 form. Your accountant handles it as part of your annual filing. No separate corporate returns. No extra bookkeeping costs.
Capital gains treatment is straightforward. When you sell, 50% of your capital gain is taxable at your marginal rate. (Note: the 2024 federal budget proposed increasing the inclusion rate to 66.7% on gains above $250,000 for individuals. Check with your accountant on the current rules for your situation.)
Lower ongoing costs. No annual corporate filings, no corporate tax returns, no separate bank accounts, and no legal maintenance fees.
The Downsides of Personal Ownership
Full personal liability. If a tenant or visitor is injured on your property and the claim exceeds your insurance coverage, your personal assets are exposed. Your home, your savings, your other investments — all at risk.
Income taxed at your marginal rate. If you’re already in a high tax bracket from employment income, every dollar of net rental income gets taxed at your top rate. In Ontario, that’s over 53% at the highest bracket. That hurts.
Limited income splitting. You can’t easily direct rental income to family members in lower tax brackets without triggering attribution rules.
Borrowing limits hit faster. Every mortgage shows up on your personal credit report and counts against your debt ratios. I’ve seen investors hit a wall after three or four properties. They’ve got great cash flow, solid equity, but the bank says no because their TDS ratio is maxed out.
Corporate Ownership: The Scaling Tool
Once your portfolio reaches a certain size, incorporating starts to make a lot of sense. But “a certain size” looks different for every investor. Here’s what the corporate structure actually gives you.
The Advantages of Incorporating
Limited liability. Your corporation is a separate legal entity. If something goes wrong with a property, creditors and plaintiffs can only go after the assets inside the corporation. Your personal home and savings stay protected. This isn’t a replacement for proper insurance — but it’s a powerful additional layer.
Tax deferral at the small business rate. This is where it gets interesting. In Ontario, the combined federal and provincial small business rate is around 12.2% on the first $500,000 of active business income. Compare that to a personal marginal rate north of 53%.
The key word here is deferral. You’re not avoiding tax. You’re postponing it until you take money out of the corporation as dividends or salary. But in the meantime, you have significantly more capital to reinvest. Let me put real numbers on this.
Say your properties generate $80,000 in net rental income. Held personally at a 50% marginal rate, you keep $40,000. Inside a corporation taxed at roughly 12%, you keep about $70,000. That’s an extra $30,000 per year to put toward your next down payment. Over five years, that’s $150,000 more capital working for you. That compounds.
Credit bureau separation. Mortgages held in a corporation don’t show up on your personal credit report. Some lenders won’t even count corporate debts when qualifying you for personal mortgages. This means you can potentially qualify for properties far beyond normal lending limits.
Easier succession planning. Corporate shares are simpler to transfer to family members over time than individual property titles. Estate planning with real estate corporations is significantly more tax-efficient.
The Downsides of Corporate Ownership
Fewer lenders, higher rates. Not all lenders will lend to a corporation. The ones that do often charge a premium — sometimes 0.25% to 0.75% higher — because there’s less competition in this space.
Personal guarantees are still required. Even when a lender agrees to lend to your corporation, they’ll almost always require a personal guarantee from the directors. So while the corporation protects you from tenant and property lawsuits, the mortgage itself still ties back to you personally.
All directors must qualify. If your corporation has multiple directors, the lender typically wants all of them on the mortgage application. If you added a family member as a director for tax or succession purposes, they need to be willing and able to qualify.
Higher maintenance costs. You need a separate corporate tax return (T2) filed annually, separate bank accounts, proper corporate records, annual filings with the provincial government, and ongoing legal and accounting fees. Budget an extra $2,000 to $5,000 per year minimum.
Passive investment income complications. If your corporation earns significant passive investment income — and rental income from a corporation that isn’t actively managing properties can be classified this way — you may lose access to the small business deduction. The rules here are complex. Your accountant needs to stay on top of this.
Once you know your rental income is exceeding your personal needs, the math gets clear fast — a corporation at 12% tax beats personal ownership at 53% every time, and that extra $30,000+ per year changes your ability to scale. book a free strategy call with LendCity and we’ll show you exactly how different structures impact your next acquisition.
The Holding Company Structure: Next-Level Organization
Once you have several properties in a corporation, the next level of planning involves a holding company. Here’s how it works.
Operating Corp Plus Holding Corp
You create two corporations. The operating corporation owns and manages the rental properties. The holding corporation owns the shares of the operating corporation.
Why bother? Because the holding corporation acts as a vault. You transfer profits from the operating corporation to the holding corporation on a tax-deferred basis using inter-corporate dividends. Those funds sit protected in the holding company, away from the operational risks of your rental business.
If the operating corporation ever faces a lawsuit or goes bankrupt, the assets you moved to the holding company are shielded.
When Does This Make Sense?
This structure adds real legal and accounting complexity. It typically makes sense when you have a substantial portfolio generating meaningful income, when you’re actively reinvesting profits, or when you want to build a structure for estate planning and wealth transfer.
For most investors with fewer than five properties, this is probably overkill. But if you’re scaling aggressively toward ten, twenty, or more units, talk to your lawyer about setting it up early. It’s much easier to build the structure from the start than to reorganize later.
When to Incorporate: The Decision Framework
There’s no magic number of properties that triggers incorporation. It depends on your complete financial picture. But here are the signals that tell you it’s time to have the conversation.
Your rental income exceeds your personal spending needs. If you’re generating more net rental income than you need to live on, you’re paying tax at your highest marginal rate on money you don’t even need right now. A corporation lets you defer that tax and reinvest faster.
You’re scaling quickly. If you plan to acquire multiple properties per year, the credit bureau separation and retained earnings advantages of a corporation become increasingly valuable.
You want liability protection beyond insurance. If your portfolio is large enough that a major claim could threaten your personal assets even after insurance, corporate ownership provides an additional safety net.
You’re planning for succession. Corporate shares are easier to transfer to the next generation than individual property titles. Start thinking about this earlier than you think you need to.
Your accountant recommends it. This is the most important signal. A good accountant who understands real estate investing will model the numbers for your specific situation and tell you exactly when incorporation starts saving you money.
If you’re planning to buy your next property, buying it in a corporation from day one costs way less than transferring existing properties later — and you’ll also access lenders and credit separation strategies that personal ownership never gives you. schedule a free strategy session with us to explore the financing options that actually work for corporate structures.
How Incorporation Affects Your Mortgage Qualification
This is where many investors get tripped up. Your structure has a direct impact on your ability to finance future purchases.
Personal income reporting changes. When you hold properties in a corporation, the rental income doesn’t appear on your personal tax return. Some lenders need to see personal income to qualify you. Others accept corporate income with proper documentation. Investment Property Mortgage Team: Who You Need.
The stress test still applies. Whether you borrow personally or through a corporation, you still need to qualify at the greater of 5.25% or your contract rate plus 2%.
Down payment requirements stay the same. Investment properties still require a minimum 20% down regardless of structure.
Some A lenders simply won’t lend to corporations for residential properties. This narrows your options. Working with a broker who specializes in investor financing is critical.
Bare trust arrangements. Some investors use a bare trust agreement where the property is purchased in the individual’s personal name but held in trust for the corporation. This gives you access to personal mortgage rates while still flowing income through the corporation for tax purposes. However, new bare trust reporting rules took effect in 2024. You won’t get the liability protection of direct corporate ownership, and some lenders don’t allow bare trusts. Always confirm with your mortgage broker and lawyer before using this approach.
Transitioning from Personal to Corporate Ownership
Already own properties personally and want to move them into a corporation? You can do it, but it’s not free.
Land transfer tax. Transferring property from your personal name to a corporation triggers land transfer tax in most provinces. In Ontario, that’s 1% to 2% of the property’s fair market value. In Toronto, you’d also pay the municipal land transfer tax on top of that. On a $700,000 property in Toronto, you’re looking at roughly $20,000 to $25,000 combined.
Legal fees. You need a real estate lawyer to handle the transfer, register new title, and potentially discharge and register new mortgages. Budget $2,000 to $5,000 per property.
Capital gains tax on transfer. The CRA treats the transfer as a disposition at fair market value. If the property has appreciated, you could trigger a capital gain. There are rollover provisions under Section 85 of the Income Tax Act that may allow you to defer this gain, but the rules are strict and require professional guidance.
Mortgage complications. Your existing lender may not agree to transfer the mortgage to a corporate borrower. You might need to refinance entirely — which means requalifying, potentially paying a discharge penalty, and securing new financing through a lender that works with corporations.
The bottom line on transitions. Moving properties after the fact is expensive and complicated. If you think you’ll want corporate ownership down the road, buy your next property in the corporation rather than transferring existing ones. It’s almost always cheaper.
Talk to Professionals Before You Decide
Every investor’s situation is different. Tax laws change. Provincial rules vary. The right structure for your neighbour may be completely wrong for you.
Before making any decisions about how to structure your real estate holdings, consult with your accountant and your lawyer. Get specific, personalized advice based on your income, your portfolio, your province of residence, and your long-term goals. A good mortgage broker can help you understand the financing implications of each structure, but the tax and legal decisions need to come from qualified professionals who know your complete financial picture.
Frequently Asked Questions
At what point should I incorporate for my rental properties?
Will I pay higher mortgage rates if I buy in a corporation?
Can I transfer my existing properties into a corporation?
Does a holding company provide extra protection?
Do corporate mortgages appear on my personal credit report?
What is a bare trust agreement and should I use one?
How much does it cost to maintain a corporation for real estate?
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.
Written by
LendCity
Published
February 15, 2026
Reading Time
12 min read
A Lender
A major bank or institutional lender offering the most competitive mortgage rates and terms but with the strictest qualification criteria, including full income verification and stress test compliance. Most investors use A lenders for their first four to six properties.
Appreciation
The increase in a property's value over time, which builds equity and wealth for the owner through market growth or forced improvements.
B Lender
Alternative lenders that serve borrowers who don't qualify with major banks, offering slightly higher rates with more flexible criteria.
Bare Trust
A legal arrangement where one party holds legal title to a property on behalf of another. In Canadian investing, bare trusts let investors buy property personally for easier mortgage approval while a corporation retains beneficial ownership.
Capital Gains Tax
Tax owed on the profit from selling an investment property, calculated as the difference between the sale price and the adjusted cost base. In Canada, 50% of capital gains are included in taxable income, though recent changes have increased the inclusion rate for amounts over $250,000.
Cash Flow
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.
Credit Score
A numerical rating (300-900 in Canada) that represents your creditworthiness, affecting mortgage rates and approval. 680+ is typically needed for best rates.
Credit Union
A member-owned financial cooperative that provides banking services including mortgage lending. Credit unions often have more flexible lending policies for real estate investors than major banks, particularly for borrowers who have exceeded conventional lending limits.
Debt Ratios
Debt ratios are financial calculations lenders use to determine how much of your income goes toward debt payments, with the two main types being Gross Debt Service (GDS) and Total Debt Service (TDS) ratios. For Canadian real estate investors, these ratios are critical qualifying factors that determine borrowing capacity, with most lenders requiring GDS below 39% and TDS below 44%, though rental income from investment properties can help offset these calculations.
Debt Service Ratio
A broad term for ratios measuring a borrower's ability to service debt. In Canadian residential lending, the key ratios are GDS and TDS. In commercial lending, the DSCR serves a similar function but focuses on property income rather than personal income.
Hover over terms to see definitions, or visit our glossary for the full list.