When to Sell Your Rental vs. Refinance It (Canada)
If your Canadian rental has appreciated 60%+ since purchase, you've got a decision to make: sell and trigger the capital gain, or refinance and keep the property. Here's the framework most Canadian advisors use.
Calculate your real cash-on-cash return today
Annual NOI minus debt service ÷ equity in the property at TODAY's market value. If that number is below 4%, your money is working harder elsewhere — even a GIC pays ~4% now.
Map the next 5-year cap-ex cycle
Roof, windows, HVAC, kitchen — anything due in the next 5 years that costs >$8k. If you'll spend $40k+ on the building in the next 5 years, the cash-on-cash gets worse, not better.
Compute the capital-gain hit if you sell
(Sale price − ACB − closing costs) × inclusion rate (50% under $250k gain, 66.67% over $250k starting 2024) × marginal rate. For most Canadian landlords this is 18-27% of the gain.
Refinance math — pulls cash without triggering the gain
80% LTV refi extracts tax-free capital. If you redeploy the extracted cash into a new property earning > 7% cash-on-cash, you're better off vs. selling and paying tax.
Lifestyle considerations
If managing the property is consuming weekends you'd rather spend with family, sometimes selling at a slight tax cost beats hanging on for another 5 years. Money isn't the only currency.
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Start free trialCommon questions
QWhat's a good cap rate in Canada?
Major urban markets (Toronto, Vancouver) sit at 3–4%. Secondary markets (Calgary, Halifax, Winnipeg) trend 5–7%. Tertiary markets can reach 8%+. Compare to the 10-year GoC bond + a 3–4% risk premium as a sanity check.
QShould I incorporate my rental property?
Usually no for under 3 doors — the cost of incorporation outweighs the tax benefit. For 4+ doors or short-term rentals operating as a business, a corporation often pays for itself by year 2. Talk to a CPA.