What are Capital Gains and How do they Work?

When people buy investment real estate, they look to see how much the property will provide cash flow (money left over after paying expenses) and how much the property will appreciate (grow in value). The goal being to find a property that can generate the greatest yield for the money invested, and will turn the greatest profit at the time they choose to sell.

When an owner decides to sell, and assuming they make a profit on the sale, they are taxed on the gain from the sale- called capital gains tax. While there are a number of different tax details that an accountant can discuss further, capital gains are taxed on the difference between the sale price and the purchase price assuming that value is positive. If an owner loses money on the sale, as in they sell it for less than they bought it, it is called a capital loss, as they lost money on that sale.

This is particularly important for landlords who have owned their property for a number of years, and especially in cases where there has been strong appreciation in the property. Currently, capital gains is not taxable on a personal residence- a place that you own and occupy.

Capital gains are calculated as the difference between the sale price and the purchase price. If a person bought a home for $300,000 and sold it years later for $500,000, they are taxable on the gain of $200,000. However, capital gains only applies to half of that gain- in this case $100,000. They are taxed on that amount at their tax rate. People who make more money are taxed at a higher rate than those who make less.

A common question that we get at Amhurst is, “am I taxed on the amount I make after I pay off my mortgage or only on how much I made after the sale?”. The answer is it does not matter how the property was financed initially, the tax is payable on the full amount of gain.

Looking for a property manager who can advise you on what rental properties to buy or sell? Contact Amhurst today!


3 Questions to Ask About Your Condo Budget

For condos with a December year end, November is the month where most condos put together their budgets for the upcoming year. The way that condos typically budget is they look at their expected expenses for the following year and then divide that by the unit number of unit factors. They then multiply that number by the number of unit factors owned by each unit to determine your condo fees for the following year. Unless it is a newly built condo, most condos look at the past few years worth of data to determine what is expected in the upcoming year.

If you own a unit in a condo, be it an apartment, townhouse or even a commercial unit, this is an important time as your condo fees may be on the rise. As condos begin drafting their budgets, here are three things to look at:

Is Our Reserve Fund Adequately Funded?

A large chunk of your condo fees (between approximately 20-60% depending on the size of your budget and needs of your property) goes towards your reserve fund. This is your condo’s purse to cover major equipment failure and capital improvements that your needs to do. The amount that should be in your reserve is determined by a Reserve Fund Study which is done every five years and outlines what your condo will need in terms of replacements and upgrades over the next 20-30 years.

Your reserve fund is an estimate of what will break down and what will need to be done at what time. Each year, your property manager should review the reserve fund to see what is expected that year, and if it is needed, ensure it is taken care of. Your reserve fund then will be more or less full than expected depending on when certain expenses are done.

For example if your reserve fund has $600,000 in it at the beginning of this year, and you have a new roof schedule for 2022, but your roof needed to be replaced this year. Your condo then spent $400,000 replacing a roof, now your reserve fund will have $200,000 left in it. On paper, your reserve fund will appear under-capitalized based on when expenses are expected, but given you have taken out that amount for a roof earlier than expected,and you won’t need to replace one for another 20-30 years (assuming proper maintenance), your reserve fund should be close to properly capitalized based on current needs.

It is important to ensure that your reserve fund is fully funded. If there is an emergency for your building, such as needing a new boiler, siding, or other large capital work, and your reserve fund does not have enough to cover the work, your condo may have to declare a special assessment. That means you and all your neighbours will have to pay out of pocket to cover the bill for work and to top-up the reserve fund. Your reserve fund study sets out the amount that should be in the fund at any given time in order to ensure you do not have to have any unplanned expenses.

Additionally, if you want to sell your condo, prospective buyers will want to look at the reserve fund study and financial statements to ensure it is properly capitalized. Having an underfunded reserve fund is risky for buyers, as they will think that a special assessment or large increase in condo fees may be upcoming. This makes it harder for you to sell your unit.

At budget time, it is important to ask your property manager or confirm using your reserve fund study and financial statement that your reserve fund is properly capitalized.

What Capital Projects Are Planned Next Year?

Although we all wish our homes will stay modern and beautiful forever, the fact of the matter is that times change, styles and change and things don’t look as beautiful as they used to. Every few years, it is important for a condo to make improvements to ensure that the common areas and building(s) keep looking presentable. Not only does it make owners and tenants feel at home and help attract business, it also enhances property values.

As an owner, it is important to know what capital projects are planned for the upcoming year. Whether that means something small like new lobby furniture or something larger like new windows or siding, condo owners should understand what is upcoming in the next year. This impacts your day to day living situation in the building, but also may impact your financial position.

If major repairs are being done to your property, they should ideally be coming out of the reserve fund. However, sometimes your reserve fund does not have enough money in it to cover the anticipated expenses, or your condo may elect to do a special assessment in lieu of taking money out of the reserve fund. A special assessment is where your condo requires all owners to pay out of pocket for an expense over a certain time frame, and can be quite costly for unit owners. Ensuring your condo does not have any special assessments planned for the upcoming financial year is a key question to ask at budget time

What Is Our Contingency?

While your condominium manager or budget planning team on your board will look at the previous year’s financial statements to determine what the next year will look like, at the end of the day it is a best guess.

Certain areas such as management fees or audit and legal fees should be quite close to actual, but other costs such as utilities or repairs can vary wildly depending on how the year goes. A prudent property manager will ensure that there is a little bit of leeway in your budget to account for fluctuations. They may even use a separate line item called contingency to build that into your budget directly. In either case, ensuring that your budget is not too tight is important.

At the end of the day, all the money collected and spent is your money. It does not disappear if you do not spend it, and it is not advisable to borrow money to cover a shortfall. Condominiums are also not allowed to take money out of the reserve fund to cover a shortfall in their operating account.

If your budget is a little bit looser and you do not spend it in that financial year, the money can remain in the account as a surplus that is carried into the next year. If your property manager accounts well, you should have very little surplus or deficit in your account at the end of the year. In a future post, we will cover what areas we anticipate an increase in your condo budget this year.

Unhappy with your condo’s budgeting process? Not getting enough out of your condo’s manager, contact us at 403-237-0477

Photo Credit: Chris Murray/Money Under 30

Does Your Property Manager Understand Your Needs?

When you own a rental property, it is important to have a property manager who understands your objectives and makes strategic choices to meet those needs. Broadly speaking, there are three major groups of people who own investment properties:

Owners by Circumstance

Life changes. As families grow and change, dispossession of real estate is not always in one’s best interest. It is common, especially in low markets, for people to move to a new home, but choose to rent out their property because the price of selling would not be worth their while. In other cases, work or life could take one to another part of the world for a number of years, and they may choose to rent their property out for the time being.

Whatever the circumstance may be, having a property manager that understands your circumstances is important. Because the rental is likely a shorter term move than if it were a strict investment property, making large capital improvements may not be ideal right away- assuming the property is rental ready

Additionally, putting a tenant into the property on a very long term lease (greater than a year) may not be in your best interest. In Alberta, on a fixed term lease, the tenant has rights until the end of the term. Unlike in other provinces, an owner cannot force a tenant out of a property in order to reoccupy their home prematurely. Having a manager who understands your timeline is imperative.

Owners by Inheritance

As difficult as a family member passing away can be, having to deal with assets and wills adds additional complications. Sometimes, families are left with real estate that needs to be managed. It can be anything from a single condo unit to a whole apartment building, but because family members may not want or be able to, hiring a property manager may be a wise decision.

“Your property manager should not be getting involved in family matters, but should be making life easier during difficult times.”

In these cases, your property manager should be adept enough to consult with decision makers to understand ownership objectives. Because these situations can be turbulent, ensuring that the property is well taken care of and any potential risks are mitigated are primary concerns for any owner. If it is an investment property, your property manager should ensure that money is paid to the right people, per the terms of the trust arrangement, and that decisions are made by those empowered to do so. Your property manager should not be getting involved in family matters, but should be making life easier during difficult times.

Owners by Choice

Owners who buy a property as an investment look primarily at two factors: What does the property rent for and what type of property appreciation will I see when I sell? A good property manager knows that keeping the property occupied is most important. Not only does it minimize costs to the owner, it minimizes risk as between the tenant’s insurance (which a good property manager ensures they have) and them being in the house to notice issues can often catch issues more quickly.

A diligent property manager also looks for ways to enhance the value of your investment property. Not only do they inspect your property to look for issues, they can also advise you on capital improvements that you can do to upgrade the property. And because they manage multiple properties, they may be able to get you a better price on these projects and work with trusted trades that will get the job done right the first time. Not only does this increase the value of your investment, it often increases the asking rent for your home, putting more money in your pockets.

Having a property manager who works for you also optimizing major costs to your property through strong preventative maintenance programs. From ensuring your roof is inspected to ensuring the tenant is maintaining your home properly, they work to ensure you do not have to make capital upgrades too often.

“Retaining tenants is a best practice in property management”

A good property manager will also employ strategies to ensure tenant retention. Keeping a tenant in your home for more than one year decreases your leasing costs, and is also less onerous on your house. If a tenant is in your home and generally comfortable living there, it saves you the cost of doing major upgrades. Additionally, moving furniture and boxes both out and in takes a toll particularly on your carpets and walls. Retaining tenants is a best practice in property management, and something your manager should have strategies for.

Signs Your Property Manager Is Working For you

Every owner has different needs. Your needs may be different from the needs of an owner who has a similar ownership structure. Regardless, your property manager should be aware of your objectives, and work towards achieving them. Starting from an initial consultation with a manager who asks about your objectives, right until the day that you choose to sell the property, it is important that they are on the same page as you.

If you are looking for a manager who will work with you to meet your management objectives, do not hesitate to contact us directly.


rental ready, Amhurst Property Management, Calgary Property

When you have a tenant that moves out of your rental property, it is imperative that the property is made ready to be re-rented. Landlords often think a property will rent as it is but this is not the case in general markets and certainly not the case in soft markets.

Here are five ways to make your property rental ready:

  1. Clear the house of unwanted items, from both inside and outside the unit. Remember, a clean curb appeal is important when you are trying to rent a house. Thorough cleaning of the unit is vital. This includes walls, floors, light fixtures, doors, frames, baseboards, walls and trim. Give special attention to bathrooms and kitchens, which are the main selling feature in any home.

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  1. Freshen the paint if required. Painting is an area owners often leave unattended, but it is a very important deciding factor for tenants. If the walls look tired, blemished, and marked, the tenant will go elsewhere. Refreshing the walls (and trim if required) can make the difference between renting the place and having it vacant. Coloured walls are typically less appealing than neutral colours. Most tenants tend to prefer neutral colours such as taupes, creams, and greys.

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  1. Attention to detail in such items as light fixtures, plug and switch plates, door knobs, and other details is imperative. If prospective tenants come to see your rental property and notice that it is missing items such as curtain rods, blinds or other items, they may pass judgment on your standard of care as a landlord. This will detract them from renting your home. Little things like a rusted shower curtain rod, a dowdy looking drape, a plug outlet with a broken cover, a stained toilet or toilet seat, can make the difference between them renting your property and going elsewhere. Think seriously about these matters as renting a house is an emotional exercise; the little things turn people away.

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  1. In cold weather, do NOT turn the temperature down in your vacant suite, just to save on heating bills. A cold house has a negative impact on potential tenants, as it does not have the homey feel. Keep the temperature aboveĀ  18 degrees, so as to ensure the property feels inviting.

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  1. Finally, if something appears like it needs a renovation or replacement, such as dowdy counter tops, or cabinets or blinds, just DO IT! Tenants do not want to live in a place that feels older or poorly taken care of. It is worth putting in the time and money to keep your rental property up to date so as to maintain a steady cash flow. Sometimes, your delay in this area can leave you with a vacancy for longer than you know.

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Amhurst specializes in making your rental property rental ready! Do not hesitate to contact us for more information.

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