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

[Greymatters]

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...

 

[Bzzliteyr]

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

 

[Greymatters]

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...

 

[Bzzliteyr]

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.

 

[armyvern]

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

 

[2010newbie]

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

 

[Bzzliteyr]

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?

 

[ballz]

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).

 

[2010newbie]

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....

 

[dapaterson]

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.

 

[armychick2009]

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!

 

[armyvern]

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

Bummer. 

 

[Pusser]

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.

 

[Humphrey Bogart]

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. 

 

[Bzzliteyr]

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?

 

[Greymatters]

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)...   

 

[ballz]

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.

 

[Pusser]

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.