# Purchasing a house and renting it out after you are gone?



## Humphrey Bogart (16 May 2010)

I am just wondering if anyone on Army.ca has experience with this sort of thing, I have been strongly looking for ways to further supplement my income and this is one way I thought would be a pretty good one, my partner is currently living in Kingston working for Kingston Public Health and with me moving to a new posting she is going to be here for the next year at least.

One of the things we had considered doing was even though I am moving, we could purchase some property that she could live in until her contract is up and then when we move back in together  (posting and job opportunity depending) we could rent our former property out to students, young professionals etc.  I actually have a plan to do this in most places I am posted and was wondering if anyone has any experience with this sort of thing?

What are the pros and cons of this sort of investment?


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## 2010newbie (17 May 2010)

Everyones situation will be different, but I have had some success with it over the last few years. It is important to ensure that your inccome is sufficient enough that you can still cover the mortgage if the house is vacant or the renters break something and you have to hire someone to fix it because you are not in the area. The first year I allowed the renters to maintain the grass and pool, but 6 months later when I received nasty phone calls from my neighbours saying the grass was 2.5 feet high and the pool was green because the filter was clogged with beer cans, I decided to reevaluate that approach. I hired someone to maintain the property and the pool, so I always knew it would be done. Your impression of the investment's success or failure will be directly tied to the vacancy percentage, attitude of the renters, and available cashflow. Now that I have been accepted in the CF, I will be moving back to the house and staying there while I finish university.


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## Humphrey Bogart (17 May 2010)

Thanks for your response,

one of the things that does worry me is getting undesirables, not saying that all students typically leave places looking like "shitpits" but many student houses I have seen end up looking like this.  Whats some advice you have for avoiding this sort of scenario?


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## Fishbone Jones (17 May 2010)

Stymiest said:
			
		

> Thanks for your response,
> 
> one of the things that does worry me is getting undesirables, not saying that all students typically leave places looking like "shitpits" but many student houses I have seen end up looking like this.  *Whats some advice you have for avoiding this sort of scenario?*



Don't rent to students period. Why bother even taking the chance. If that is the only demographic that you can rent to, you have a problem. If it's not, don't even make them a consideration.


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## Bzzliteyr (17 May 2010)

I actually had this conversation a few times in the past weeks...

One of the cpls here has two triplexes.  He told me some very interesting horror stories as I am looking to rent my home when I am posted next month.

My other friend (who rents multiple places) suggested a very thorough interview process including background and employment checks.  I was even given some forms to use to initiate the process with potential renters.

I will be renting my place at the Montreal average and it should bring in some good cash.  I plan on chatting with a real estate accountant as from what I understand there are tax breaks related to vacating a residence due to posting.  

I know there is something about being able to use rent to pay off the mortgage and not pay taxes on it or something like that, like I said, I need to get informed.


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## Fishbone Jones (17 May 2010)

I don't know what it costs, but I've heard it's not much in the long run, to get a property management firm to look after the place and keep an eye on the tenants. It can probably be arranged through whoever holds the mortgage, as they have a vested interest in the condition and market value of the property anyway.

Like I said, I don't have a clue about it, but it certainly seems to be a viable option.


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## Task (17 May 2010)

A few points I have experienced:

1) Get a good property manager. Some property managers will call an electrician to change a lightbulb, a $60 lightbulb.??

2) Rent to military people if possible. You know where to get a hold of them and "generally" will not be fired while you are renting to them. If IR comes back you can charge HIGH rate for your Rent. Ie Petawawa $1900/month

3) When you create your contract(s) be specific on what you want. Ie no pets/smoking.

4) Be aware that every province has different tenant acts. In Ontario you can NOT ask for a damage deposit. And the max you can raise the rent per year is 3%.

5) If you are using the home as an income property, make sure your mortgage rate is high as you can get it. This is because you will get that money back in taxes. If you want more info on that pm me.

6) When (if) you sell the home you will be taxed on the profit you made compared to when you bought the home. Ie you bought for 100,000 and sold at 110,000, you would get taxed at 10,000 capital gains.

Good luck hope it goes well.


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## PMedMoe (17 May 2010)

[Off topic]

IR rate in Petawawa is $1900?     Who the hell pulled that figure out of their a$$?

[On topic]


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## Task (17 May 2010)

IR rate in Petawawa is $1900?     Who the hell pulled that figure out of their a$$?

@ PMedMoe It's actually $1800 with $100 for parking


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## PMedMoe (17 May 2010)

Task said:
			
		

> IR rate in Petawawa is $1900?     Who the hell pulled that figure out of their a$$?
> 
> @ PMedMoe It's actually $1800 with $100 for parking



I _suppose_ it's because there's not too many places for rent, or furnished places.  We only get $1600 (+$100 for parking) in Ottawa.   :


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## Bzzliteyr (17 May 2010)

I thought it was a CF wide flat rate?  Montreal is $1200 +$100.


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## PMedMoe (17 May 2010)

Bzzliteyr said:
			
		

> I thought it was a CF wide flat rate?  Montreal is $1200 +$100.



Nope, varies by area.  $1200 for Montreal seems a little low to me.


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## ballz (17 May 2010)

recceguy said:
			
		

> Don't rent to students period. Why bother even taking the chance. If that is the only demographic that you can rent to, you have a problem. If it's not, don't even make them a consideration.



The student demographic is not the problem. In fact, I'd be willing to bet if you're going to rent to 18-22 year olds, your best bet is to rent to a student. I find it rather irritating when people refuse to take students. If you can't take the time to tell an idiot from a sensible person, and aren't diligent in keeping a check on the property and tenants, it's not students or any other tenants that are biting you in the ass, its your own damn fault.

Hate to say it, but besides being a responsible landlord (good selection process and keeping a check on things), the price range is generally the best way to deter morons from your property.


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## Fishbone Jones (17 May 2010)

ballz said:
			
		

> The student demographic is not the problem. In fact, I'd be willing to bet if you're going to rent to 18-22 year olds, your best bet is to rent to a student. I find it rather irritating when people refuse to take students. If you can't take the time to tell an idiot from a sensible person, and aren't diligent in keeping a check on the property and tenants, it's not students or any other tenants that are biting you in the ***, its your own damn fault.
> 
> Hate to say it, but besides being a responsible landlord (good selection process and keeping a check on things), the price range is generally the best way to deter morons from your property.



Yep. Oh wait. What's that saying about opinions and assholes?


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## armychick2009 (17 May 2010)

You can rent to students but... make sure they are MATURE students... maybe those in a second career? And, rent to ONE person... ie, a renter and their family... do not individually rent out a four bedroom home to four individual students. That is a nightmare waiting to happen. You can make more money doing it that way but - unless you are in the same city and can deal with issues right away, I wouldn't. Not with a ten-foot pole. If you want to rent to someone while you're out of province, find a property management company to take care of any problems while you're gone. Worth the money, trust me.

Good luck!


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## Bzzliteyr (17 May 2010)

I will be renting in the $2000/ month range for a 3 bedroom in Montreal West with driveway, front and backyard, alleyway access and 3 stories.

I will be leaving all kitchen appliances and there is a laundromat up the street though connections for washer/dryer if the tenant needs.

I feel by pricing it in this range i will most likely find a professional or family that will take good care of the place.  There is no way I'd rent to a bunch of frat boys unless they checked out.  I've already had interest from a friend of a friend and said no.

The question now is, where to list?   I want to do this alone, with no agents.  Craigslist, Kijiji.ca and louer.com are the first to come to mind, any others?


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## 2010newbie (17 May 2010)

My Mother rents out rooms and a basement apartment in Whitby. She has had a lot of success with Kijiji.ca. I rent out rooms in my house, but I only rent via word of mouth.

She also performs reference and credit checks on the prospective tenants. She has only had one wackjob - a crazy librarian that went nuts in the middle of the night. Police had to come and remove her from the premises.


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## Bzzliteyr (17 May 2010)

That's my plan.. references and credit checks.   Anyone willing to go through those is probably safe...


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## ballz (17 May 2010)

recceguy said:
			
		

> Yep. Oh wait. What's that saying about opinions and assholes?



Mine is right and if you don't agree you're an asshole? Har har!  ;D


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## TimBit (18 May 2010)

PMedMoe said:
			
		

> Nope, varies by area.  $1200 for Montreal seems a little low to me.



Montreal is a cheap place to rent. Average rent in 2009 was 'round 650$. Speaking of which Bzzlite, make sure you take into account the large availability of cheap rentals in Montreal. 

As a student, I lived there for 5 years and never had any issues finding proper well located appartments below 800$.


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## Greymatters (18 May 2010)

Bzzliteyr said:
			
		

> That's my plan.. references and credit checks.   Anyone willing to go through those is probably safe...



This is a common assumption but a person who looks 'clean' can still be a hassle if they know how to play with the rules.  (I.e. a tenant can sign a one year lease agreement but if they stop paying rent and get served an eviction notice they are no longer obligated to pay the lease agreement.  All perfectly legal.) 

If youve never done it before, you are bettter to do it through a property manager.  For $100 a month they keep tabs of your tenant and make sure they pay on time.  They also know the tenant/landlord rules a lot better than you do, and have access to the list of tenants who they know will be problems.    

If you're lucky enough to get a CF member living there that can solve a lot of those issues...


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## Bzzliteyr (18 May 2010)

If I price at $2000.. I'll get people looking to rent at $2000.. from what i was told.


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## Greymatters (18 May 2010)

I own one that has all the indicators of a past grow-op location; luckily it didnt do any permanent damage, but interesting how they set up their venting so that the neighbours had no idea that anything unusual was going on...


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## Bzzliteyr (18 May 2010)

Greymetters, good point.. lucky for me, I have a nosy attached neighbour who in conjunction with my contrator, will probably be maintaining/watching the place.


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## armyvern (18 May 2010)

2010newbie said:
			
		

> She also performs reference and credit checks on the prospective tenants. She has only had one wackjob - a crazy librarian that went nuts in the middle of the night. Police had to come and remove her from the premises.



There is no such thing as a wackjob-crazy Librarian.  

 ;D


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## 2010newbie (18 May 2010)

ArmyVern said:
			
		

> There is no such thing as a wackjob-crazy Librarian.
> 
> ;D



My girlfriend is a librarian and got her MLIS from Western. It seems like everyday she comes home from work with some crazy story, never mind the stories about what her and her classmates did  at library school....

Just for clarification - the crazy librarian I referred to earlier is NOT my girlfriend.... ;D


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## Bzzliteyr (18 May 2010)

Does she have that fantasy "hot redhead librarian with glasses" look to her.. you know, the batshiat crazy look that makes them so easy on the eyes?

Anyhow.. rent.. yeah.. owning a property...

I heard that for me to go from "occupying" to "renting" a house, might involve me "selling" it to myself?  Is this true?  Anyone?


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## ballz (18 May 2010)

Bzzliteyr said:
			
		

> I heard that for me to go from "occupying" to "renting" a house, might involve me "selling" it to myself?  Is this true?  Anyone?



Pretty sure that's not necessary.

I think whoever mentioned that to you would have been talking about if you decided to incorporate. If you were to do that, you would have to transfer the assets from your own estate to the corporation, by "selling" the property for a dollar would be the easiest/quickest way. If you wanted financing, or planned on obtaining more properties to rent via future financing, there may be benefits to incorporating. If you already have the financing or own the house, it's not as much of a benefit.

I'm not a CA or a lawyer, so don't take my word to the bank but I'm getting there (CA wise).


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## 2010newbie (18 May 2010)

Bzzliteyr said:
			
		

> Does she have that fantasy "hot redhead librarian with glasses" look to her.. you know, the batshiat crazy look that makes them so easy on the eyes?
> 
> Anyhow.. rent.. yeah.. owning a property...
> 
> I heard that for me to go from "occupying" to "renting" a house, might involve me "selling" it to myself?  Is this true?  Anyone?



I've owned my house now for 6 years and I have been renting it for 3 (and claiming rental income). As I stated previously, I rent out rooms only and I keep a room there for myself when I'm in town. I've never heard of having to sell the house to yourself though and Revenue Canada hasn't sent me any nasty-o-grams yet either..

Sorry, she's blonde with glasses, not a redhead....


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## dapaterson (19 May 2010)

You will want an evaluation done when you stop living in and start renting out, since the appreciation since you bought it is  not taxable in your hands - it was your primary residence.  When you sell in the future, you will owe capital gains on the icnrease in value from when you moved out to when you sell.

So, for example:

Buy House, 2008: $100 paid
Move out, 2010: $106 evaluation
Sell house, 2011: $111 net proceeds

You'd have a taxable capital gain of $5, since the $6 in appreciation from when you bought to when you moved out is tax free.


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## armychick2009 (19 May 2010)

My friend is a librarian but she isn't the wackjob... the people who came to her, were! If you want some REALLY good stories, you GOTTA find a librarian for a friend. Some of my most favourite, prized stories come from her... 

... weirdness just seems to find them out!


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## armyvern (19 May 2010)

2010newbie said:
			
		

> Sorry, she's blonde with glasses, not a redhead....



Bummer.


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## Pusser (19 May 2010)

Bzzliteyr said:
			
		

> The question now is, where to list?   I want to do this alone, with no agents.  Craigslist, Kijiji.ca and louer.com are the first to come to mind, any others?



DON'T DO IT!

Hiring an agent is probably the smartest thing you can do.  First of all, it's a tax-deductible expense (remember, renting out your house is a business).  Secondly, a proper rental agent not only markets the property for you, but they also do background checks.  When I rented out my house, the agent cost me a month's rent and it was worth every penny.  I had tried to do it own, but look back with thanks that the tenant I initially looked at didn't come through.  I found out a few things later that indicated that they would have been a disaster.  Instead, the agent found me a neat conscientious tenant who paid her rent on time.  She was there for seven years and I didn't have to repair any damage when I sold the place for tidy profit.  My advice is not to go cheap on this.  Property is an investment.  You need to spend the money to do it right or you will be sorry.


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## Humphrey Bogart (20 May 2010)

Guys, thanks a lot, the input received in this post has been really informative and helpful and I am going to look into a lot of this stuff a lot more in order to get the most bang for my buck.  There seem to be a lot of unknown nuances that if investigated could make the investment a lot more worthwhile.


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## Bzzliteyr (21 May 2010)

Pusser said:
			
		

> DON'T DO IT!
> 
> Hiring an agent is probably the smartest thing you can do.  First of all, it's a tax-deductible expense (remember, renting out your house is a business).  Secondly, a proper rental agent not only markets the property for you, but they also do background checks.  When I rented out my house, the agent cost me a month's rent and it was worth every penny.  I had tried to do it own, but look back with thanks that the tenant I initially looked at didn't come through.  I found out a few things later that indicated that they would have been a disaster.  Instead, the agent found me a neat conscientious tenant who paid her rent on time.  She was there for seven years and I didn't have to repair any damage when I sold the place for tidy profit.  My advice is not to go cheap on this.  Property is an investment.  You need to spend the money to do it right or you will be sorry.



Pusser, thanks.  That seems like very good advice and I think I will heed it.

Now, would you recommend an accountant as well or is the finance side of things easy?


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## Greymatters (21 May 2010)

Although it is possible to do it yourself, I recommend going to an accountant if you are just starting.  They know the rules and if you have a good one they will know how to get the best returns on your investment (hint hint not all of them know what they are doing).  After you get back one or two completed years worth of forms you can see how it is done and can decide if you want to do it for yourself.

I keep using an accountant as I dont have time to keep up on tax laws and changes, thats what I pay him the big bucks for.  He's also ex-military and does a damn good job, so Im happy to pay him (and he seriously undercharges for his work).

Finally and most important, when a certified accountant submits your papers, its pretty much accepted by RC with only occasional files audited.  If you submit your own papers for the first time chances of you getting audited are extremely high (which is usually just inconvenient unless youve tried to pull a fast one)...


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## ballz (21 May 2010)

Greymatters said:
			
		

> Finally and most important, when a certified accountant submits your papers, its pretty much accepted by RC with only occasional files audited.



And, if it is audited and found to be wrong, its the accountant that is liable for it, not the client.


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## Pusser (21 May 2010)

Greymatters makes a good point.  I hired an accountant for the first few years.  Once I was comfortable, I did it on my own.  When I decided to sell the house (without ever reoccupying it - if you sell a house you don't live in, you have to pay taxes on the capital gain), I hired an accountant again.  I have a simple rule when it comes to paying for services:  compare the cost of the service with the cost of getting it wrong.


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