Have you ever thought of becoming a Landlord?? There is lots to consider if you are thinking about repurposing your home (principal residence) or purchasing a rental property.
With the many clients we work with each day, we have found that emloyement opportunities sometimes draw folks to every corner of the earth. Perhaps you are considering a job opportunity far way, but do not really want to sell your current home. Renting out your home (principal residence) may be an option for you. But, as a Landlord myself, I can attest that there is LOTS to consider before making that decision to rent out your property. Weigh the pros and cons carefully. This information below is also valuable to consider if you are thinking about purchasing a rental property.
Tax Implications – You need to familiarize yourself with the Income Tax Act. A person can be considered ‘disposing’ of a portion or all of your principal residence, even if you did not actually sell it to a third party, but just changed the use. This invokes an ACB (adjusted cost base). Please read these excellent articles written a few months ago in the Financial Post (ACB) and also Financial Post (selling a home or cottage)that explains these new facts in detail.
Banking – Think of this adventure as ‘a business’ (which it IS). It is wise to set up a separate account where you deposit your rent, as well as for using for any maintenance costs. Cash flow is important as you must be in a position to be able to cover the costs to carry this property at all times …. tenanted or not!
Emotion – Your emotions must be cosidered if you’ve decided to rent out your home (principal residence) which most of us have put our heart and soul into. Although hard sometimes, you must detach yourself from this principal property as you will find that seldom does a tenant treat your property the same way you would. Yes, there is an excellent chance you will have a number of maintenance and renos to do when your tenant leaves.
Relationship – A truth is that at some point, your tenant will leave the tenancy with you. You must always remember and plan for this fact … don’t let their ‘notice to vacate’ be a financial surprise. Be prepared so that you are able to carry the cost of mortgage, insurance and utilities for at least three months.
Maintenance & Repairs – as proactive as you are, life still happens and there will be a time when an applicance breaks down, nature’s storms damage the structure in some way – something untoward happens that you cannot predict. Planning is key! Each month, some of your rental income must be set aside so that you are ready for any ‘unknown’, as your tenant will expect/deserve the fixes to happen in a timely fashion.
Life is a Gamble – the only sure things in life is death and taxes. In 2017 we’ve enjoyed a wonderful real estate market and the experts say this will continue. BUT …. when investing, you must always understand that there could be unknown circumstances happen deeming that you will not make money on this investment.
Vetting – it is SO important to carefully interview your potential renters and check out their references thoroughly. Familiarize yourself on both your and the tenant’s rights and responsibiliteies under the Ontario Residential Tenancy Act. I personally have learned over the years that sometimes taking a little less rent and acquiring a loyal tenant is money in the bank! Perhaps your doing some “trading” can work for everyone (EG: in writing, agree that you take less rent money and in turn, your tenant agrees to perform some of the maintenance chores like mowing lawns, shoveling snow, etc.) A loyal tenant is definitely money in the bank!!!
Whether renting out your home or purchasing a rental property, these are huge decisions. You must try to think about/consider all of the scenarios. Make sure you research the local market and set your rent price accordingly.
Are YOU thinking of calling this beautiful area home or perhaps want to have your own vacation retreat in Wasaga Beach? Our Brokers, Scott (Direct 705-446-6602 Scott@WasagaRealEstate.com) or Chad (Direct 704-443-9444 Chad@WasagaRealEstate.com) would feel privileged to help make your Wasaga real estate dreams come true. Contact us today!