Selling an investment property is a little different than selling your primary residence. In some ways, it’s easier. You don’t have to pack up your belongings and move everything to a new home. When you sell, you can decide what you want to do with the profits and when.

You can fund your retirement or live your dream to travel the world. Or you can seek out a new investment that is more appropriate for this time in your life.

As a seller, the market is on your side. Prices are at an all-time high in 2022. You might think that would scare away potential buyers. But with low-interest rates, more people than ever are looking for their new forever homes. If you’re tired of being a landlord and want to cash out, there’s never been a better opportunity. 

Whatever your reason for selling, you want to maximize your sale as much as possible. Here are some tips to help you get more for your property:

• Five Tips For Marketing Your Home For a High Return
• How Sellers Can Make the Most of a Hot Market
• How To Price Your Home For the Market

Selling an investment property is less complicated than you think, but there are a few things you’ll need to be aware of.

You will have to pay a Capital Gains Tax.

When you sell your primary residence, there is no capital gains tax to worry about. The profits are all yours to do with as you wish. However, when you sell any other asset at a profit, there is a tax on it. This tax applies to any investment, like mutual funds, stocks, or bonds. It can even apply to personal items when you sell them for more than you pay for them. 

And, of course, capital gains apply when selling any house you don’t currently live in.

Some sellers hold on to a property for far longer than they should because they fear losing money because of capital gains taxes.

However, once you understand them, you’ll know what you can do to maximize your profit. 

First, let’s take a look at how these taxes work. They apply to 50% of your profits when you sell anything other than your primary residence. 

For example, imagine selling a property for $200,000 more than you paid for it.

• $100,000 is taxable. You’ll have to claim it as income at the end of the year. 
• The rest of the proceeds are yours free and clear to spend or invest however you like.

The amount subject to capital gains has fluctuated over the years.

First introduced in 1972, 50% of the profits of all assets became taxable. In 1990, the amount skyrocketed to 75%. Then in 2000, the Canadian government reduced it back to 50%. Recently, there has been talk of increasing the amount again. 

It’s unlikely because there are so few listings available and so many people trying to buy houses. The government is under pressure to do something to relieve this housing crunch and encourage homeowners to sell. However, with the debt incurred due to the pandemic, anything is possible. 

Reducing the Impact of Capital Gains. 

Your financial advisor or accountant can help you minimize the impact of the capital gains tax. How? There are several options available. 

You can choose to reinvest the bulk of your profit into a tax-sheltered investment such as an RRSP a TFSA. You may even be able to defer your payments to soften the blow. Charity donations are another way to pay less in tax overall.

Aside from the capital gains tax, you may face one more complication when selling an investment property. 

Want to know more about reinvesting your profits? These articles will help.

• Why Invest in Real Estate
• How to Grow Your Real Estate Portfolio in 2022
• Where to Invest in Real Estate in Ontario

What Happens if You Have Tenants?

It is perfectly legal to sell a house that has tenants. However, it is essential to know the law regarding tenant rights. For example, you can NOT evict a tenant to sell the home. A written lease protects your tenant from being evicted before the agreement is up. The new owner will have to honour all terms of the lease.

You must provide 60 days’ notice to tenants renting on a month-to-month term that you intend to sell. 

And as always, tenants have the right to 24 hours notice if you enter their unit for any reason, including showing it to prospective buyers.

Selling and cashing out your investment can give you a head start to the next chapter of your life. You’ll be free of the hassles of being a landlord and have the funds to enjoy many new adventures. 

If you decide the time is right and want to know how much your home is worth, you can get a free home evaluation here.