Is renting your current home or owning an investment property a financially viable option for you? An accurate opinion on rental income is vital to your decision. You should also factor in vacancy periods, repairs and maintenance, and a “rainy day” fund for unanticipated loss of revenue, often due to job loss or economic hardship incurred by the tenant.
When marketing a property for rent many of the same principles and approaches for selling a property apply. Your goal is to obtain the best lease terms and conditions and attract the most suitable tenants. To achieve this, you need a property that is both appealing to the public and is priced in context with current market conditions. Presentation is key and will ultimately help you, the landlord, benefit most.
When you rent a property that is not your principal residence, the rent received is treated as income and taxed accordingly, and in line, with your personal income. Canada Revenue Agency allows for certain deductions to be made against the rental income. The total net rental income (gross income less expenses) is added to your regular income. Some expenses that CRA allows as deductions are: mortgage interest, property taxes, repairs and maintenance, property management fees, real estate fees, and insurance.
If you plan to rent your principal residence you will have to notify your insurance company. Your current home insurance policy will change to a Rented Dwelling Policy. Your tenant must have Tenant’s Package Insurance with basic coverage for fire, theft and third party liability. Since their contents are at their risk, it is their decision whether to insure them or not. Tenants should provide you with a copy of the policy and any subsequent renewals.
Consider hiring a Professional Management Company. Undoubtedly, a professional property management company will be more informed about the laws governing Landlord and Tenants in the Province of Ontario and you will benefit from their years of experience in interacting with tenants. A property manager will allow you to maintain an emotional distance from your tenant. This will help you stay objective when making business decisions.
Take the time to prepare a thorough Lease Agreement that is fair to both parties. An extensive Lease Agreement will go a long way in solving future disputes, especially over small and somewhat trivial matters that can erupt into much larger ones. Most tenants tend to forget what they have signed, or agreed to, months ago. The ability to refer back to the lease will keep the landlord and tenant relationship formal and will efficiently solve the problem at hand. Make sure your lease content and clauses are consistent with the Residential Tenancies Act.
Take the appropriate steps to qualify tenants. As the landlord you are able to request certain details and information from each tenant as part of the qualification process. These details typically originate in a standard rental application completed by the tenant. Verify all the information they provide including: employment and income verification, place of business address, current residential address, and personal references. The failure to perform this critical step substantially increases your risk as Landlord.
Choosing a Realtor to help you rent the property is money well spent, provided you are working with the right Realtor. If you are a novice landlord, you may welcome help with marketing and showing the property, and may want additional peace of mind by acquiring professional assistance in qualifying applicants.
Contact us today and let’s start shopping for your new home.