What To Do With Investment Property When Retired
As retirement approaches, many Canadians find themselves facing a key question: What should I do with my investment properties?
Rental real estate can be a powerful financial tool—either as a steady stream of passive income or as a valuable asset to sell and unlock significant equity. But managing rentals in retirement isn’t as simple as flipping a switch. It involves weighing cash flow, lifestyle preferences, taxes, and even family priorities—particularly if you’re considering helping your children buy their first homes.
Let’s explore your options and how your rental properties can serve not only your retirement but also help support your family’s next generation.
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1. Keep The Rentals For Passive Income
One of the most common strategies retirees use is holding onto their rental properties and using the rental income to supplement their pensions, RRSP withdrawals, or other retirement savings.
Once mortgages are paid down—or ideally paid off entirely—rental income can provide predictable cash flow to cover living expenses, healthcare costs, and even travel or hobbies. This can be particularly appealing for retirees who:
Don’t mind occasional property management tasks (or are willing to hire a property manager).
Want to maintain ownership of appreciating assets.
Prefer stable, inflation-protected income (rents generally rise over time).
However, it’s essential to be realistic about the effort required. Even with a property manager, unexpected repairs and vacancies happen. Expenses like roof repairs, HVAC replacements, or appliance upgrades can quickly erode annual profits.
2. Sell And Reinvest For Simplicity
Another popular option is to sell some or all of your rental properties in retirement. This frees up significant capital and eliminates the stress of property management.
Many retirees choose to liquidate their real estate holdings and shift the proceeds into more passive, diversified investments like:
Dividend-paying stocks.
Index funds or ETFs.
Bonds or GICs (especially for low-risk portfolios).
This can dramatically simplify your financial life in retirement—no more tenants, repairs, or property taxes. Additionally, selling may be a smart tax move if property values have appreciated considerably, allowing you to lock in gains (though be mindful of capital gains taxes).
This strategy may also help diversify your wealth. If most of your net worth is tied to real estate, selling one or more properties can spread your risk and give you more flexibility to manage cash flow throughout retirement.
3. Gift, Sell, Or Transfer Properties To Your Kids
Here’s where this conversation connects to a growing concern among many Canadian parents: helping their adult children buy homes.
Home prices remain high in many parts of Canada, and younger generations face significant barriers to homeownership. Parents with investment properties often find themselves thinking:
“Should I give or sell one of these properties to my kids?”
This can be done in a few ways:
a. Gift the Property Directly
This is generous—but can come with tax implications. While Canada doesn’t have a formal “gift tax,” transferring a property to a child at less than fair market value is still deemed a sale by the CRA, triggering capital gains tax on the increase in value since you purchased it.
Still, this method allows parents to directly help their kids, while potentially passing down a valuable long-term investment.
b. Sell at Fair Market Value (or with a Family Discount)
Another option is selling the property to your child, either at full fair market value or at a modest discount. This can help your child get into the market and may reduce your taxable gains compared to gifting the entire property outright.
However, your child will likely need to qualify for their own mortgage, which could be challenging depending on their income and credit.
c. Keep Ownership, Share Rental Income Later
Some retirees prefer to hold onto the properties but earmark future rental income to help their children. For example, you might collect rent during your early retirement years, then start sharing or fully transferring the rental income later—either through inheritance or as part of a living trust or estate plan.
This approach allows you to retain full control of the properties, while still helping your kids long-term.
4. Other Key Factors To Consider
Whether you choose to keep, sell, or gift your rentals, there are a few important considerations:
- Tax Implications
Selling a rental property triggers capital gains tax on the profit. The inclusion rate may vary over time, and government policies can change, so it's wise to consult a tax professional before making big moves.
If you pass away holding rental properties, your estate could face a significant tax bill on unrealized gains, unless you’ve planned carefully.
- Liquidity And Risk
Unlike stocks, rental properties aren’t very liquid. In slower housing markets, it could take months (or longer) to sell. You’ll also want to think about how much of your retirement funds are locked in these illiquid assets.
- Your Health And Lifestyle
Managing properties requires energy and time, even with a property manager. As you age, your tolerance for landlord responsibilities may decrease. Many retirees sell when the work becomes too stressful or physically demanding.
- Market Timing
While timing the real estate market isn’t easy, some retirees opt to sell during strong market conditions—cashing out at peak prices and sidestepping future downturn risks.
5. Striking A Balance Between Retirement Security And Family Support
Ultimately, the decision about what to do with investment properties in retirement often comes down to your personal values and priorities:
Do you want guaranteed monthly cash flow, or are you more concerned about simplicity?
Would you prefer to maximize your own retirement enjoyment, or prioritize helping your kids get into the housing market?
How much risk are you comfortable with?
Some retirees keep one or two properties for income, while selling others to diversify or assist family members. Others gradually liquidate properties over the years, using the proceeds to fund both retirement expenses and gifts to children.
Final Thoughts
There’s no single “right” answer here—but the good news is that rental properties offer flexibility. They can be sold, passed on, or kept for cash flow depending on your goals.
If you’re thinking of helping your children buy a home using your investment properties, it’s essential to plan carefully with the help of financial advisors, tax professionals, and estate planners.
By aligning your retirement strategy with your family’s long-term needs, you can turn your real estate investments into a lasting legacy—while still enjoying the fruits of your hard work in retirement.
