According to The Huffington Post, “buying any type of residential property in Greater Toronto is 11.9 percent more expensive today than it was a year ago”. A recent article in The Vancouver Sun indicates that banks are currently monitoring the real estate markets in Toronto and Vancouver with thoughts of raising interest rates in order to control rising housing costs in the GTA and other major centres.
With the housing market being especially hot right now, it seems like the perfect time to sell. You own your own home but changing life circumstances are making you consider a change. You’ve had a child and now need more space, you’re considering retirement and need less space or you have been transferred for work and will be relocating. Perhaps you have concerns about potentially decreasing real estate values should the market cool significantly.
There are many reasons to consider selling but renting your property instead of selling is often a profitable and simple option.
Selling Vs Renting
Owning two or more properties requires an investment of money and time which is not ideal for everyone. Selling allows you to relocate without worrying about carrying costs and additional mortgage payments. And it can provide you with immediate income if you need it.
Renting your home can be a viable and profitable alternative to selling. Depending on your local rental market, it may be possible to rent out your property while your tenants pay your mortgage and even the additional expenses such as insurance and taxes. Since properties appreciate in value over time and price fluctuations in the real estate market tend to be short-term (in spite of what the media says), having the mortgage paid for by tenants can make rental properties an especially attractive investment.
Renting also offers the security of allowing you to keep that residence should you need to move back into it for any reason later on.
Before Becoming a Landlord
When considering renting your property, check your local rental market to see what similar properties in your area are renting for. Ensure that you will have enough income from the rent to cover all expenses you might incur beyond the mortgage such as property taxes, insurance, repairs and utilities. This will help you determine if renting is a feasible option.
Consider whether you can carry the mortgage if your tenant is late with the rent or skips out entirely. Factor in potential tenant damage to your property and major repairs like the heating system or shingling the roof.
Consider the Tax Benefits
One of the benefits of being a landlord is that you can claim tax deductions against your rental property. The Canada Revenue Agency has a list of the expenses you can claim which includes things like advertising, insurance and repairs.
A qualified bookkeeper can help you at tax time but remember that the more expenses you claim, the more you can reduce your taxes payable since you are required to claim your rental income. Maintain great records of all income and expenses and keep all of your receipts.
When in Doubt, Refer to a Professional
If you’ve decided to rent your property but have concerns about the time commitment, you can always hire a property manager to take care of it all for you.
A good property manager will vet potential tenants, collect rent and ensure maintenance is done on a regular basis. This can help maintain the value of your home in the long term. For many landlords this is a great solution since it frees them from those day to day concerns.
View Renting as an Investment
The real estate market can be risky and volatile. Done properly, renting your property can help manage those risks and provide you with an additional long term investment to add to your portfolio.