Should You Rent out Part of Your Home?
It sounds like a good idea at first: you want to make some extra on the side and you have all this room in your house. Why not turn your basement or that spare bedroom into a money-making machine and rent it out?
With the Canada Mortgage and Housing Corporation recent announcement that they are planning on making it easier for Canadians renting out suites in their home to borrow money, you might think that now is a good time to make the leap into being a landlord.
But while there are plenty of pros when you rent out part of your home, there are some cons that you should definitely consider as well.
The good is really good
Another source of income: This is the big motivator for most people when deciding to rent out a part of their home. You have a reliable source of income that you can put towards your mortgage, savings, or paying down debt.
When you rent out part of your home it can free up extra money to put towards a dream vacation, a year off work, or going back to school. No matter what your goals are, you can’t let the “free money” blind you to all of the facts.
Building in a suite increases value: Renovating your home can increase its value and make it more attractive to buyers. People who are interested in having a second source of income will be more interested in your property - especially if the renovations have been done well.
The bad could be better
Repairs and maintenance: You remember that funny noise your tap makes before it starts spewing water? You might not think it’s a big deal, but if your tenant has concerns, you’re on the hook to fix it sooner rather than later. In short, all your tenant’s concerns and complaints become your concerns and complaints when you rent out part of your home. Remember to set aside a portion of the rent to address these issues as they arise.
Your income is taxable: You might be tempted to get shifty with the H&R Block guy and deny your extra income but think twice. Revenue Canada has fleets of people dedicated to connecting the dots between your income and your tax file. You really don’t want to get stuck with that tax bill once they figure it out.
The ugly is really ugly
Property Damage Pitfalls: It’s possible that your tenants are not as trustworthy as you thought. They might burn or stain your carpet, punch holes in your walls, and let water overflow in the bathroom so it damages your walls and grows mold. You’ll need to make sure you have the proper insurance and money set aside to deal with this possibility if you rent out part of your home.
Rules and Regulations: Every province has its own landlord and tenancy act. It’s up to you to become familiar with them all. For instance, Alberta law states that you have to give your tenant twenty-four hours’ notice before entering their suite. You could get a hefty fine if you violate these laws.
Pay attention to the pros and cons. If you decide to rent out part of your home, you need to make sure that the advantages more than offset the downsides.