# Renting out a basement.



## Fraser19 (Aug 23, 2013)

Hey guys,

I got a few questions. I am planning on moving to Lethbridge within a year for the next step in my career. After I am there for six months and it seems like everything is all good with my employer which I am hopeful for a government job I would like to buy a house.

Now there are a few reasons why I want to move to Lethbridge. First off housing is much less expensive compared to Calgary which is a major bonus. The second is that with the university there are a lot of students who rent. Also a lot of houses in Lethbridge come with separated basement suits. 

All of this is very appealing to me. If this plan materializes this will be my first home as well. With the homes I have been looking at I can keep my mortgage around 1100 a month on weekly accelerated payments and I can rent the basement out for $600.00 pretty easily. In addition my girlfriend and I will be splitting the remaining amount of the mortgage payment and utilities between the two of us witch would probably add up to another 300-400. I feel that being able to put an exter 10,000.00 into the mortgage annually would make for a excellent way to pay the house off as fast as possible.

Financially I am in a good position to buy the and the job I am wanting in Lethbridge would be 75,000 to start. So I don't really need the renter, but I want someone else to pay some of the mortgage. My plan is to put all of the rental income into the mortgage which would allow me to pay the house off in about 11 years. 

I am wondering if I can write off the interest in my mortgage by doing this? This has a major appeal to me as the interest on houses is massive. I also am curious if rental income is taxed as regular income or differently?

I have done next to no research on this prior to now, but I want to be prepared for when I head into this next year. Any tips you guys have for me?

Thanks,
Fraser


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## My Own Advisor (Sep 24, 2012)

Good idea, just be careful.
http://www.secondsuites.info/pros and cons of a second suite.htm

This is just one article of many to start your own research and due diligence.

More importantly, this will become your new bible:
http://www.cra-arc.gc.ca/E/pub/tg/t4036/README.html


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## Just a Guy (Mar 27, 2012)

You may also want to consider the downside of being a landlord...

After owning many properties, I can tell you I'd never let someone rent in a place where I lived. I've got no problems with them renting a separate place, one where they can't have access to my stuff, or potentially my kids/pets.

One bad tenant, in a separate place can be a pain...one bad tenant with access to you and your stuff can be a life changer...

But that's just me. I've found 90% of my tenants are good, and of the 10% of bad ones, only 10% of those are REALLY bad. You don't want that 1% to be in your home, maybe not even the 10%. 

Yes you can write off a portion of the interest and yes the rental income is considered regular income. If it's just a basement suite, you don't get as many write offs as you do if you're an owner of multiple properties either. I believe CRA wants you to own 3 or more for the full benefit.


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## Mookie (Feb 29, 2012)

Apart from the very important financial aspects of renting out a basement suite, my advice to you, having done this myself for the past 5 years, is to be very careful about who you accept as a tenant. 

Don't be greedy and take the first mouth breather willing to move in just because the basement suite is empty. More likely than not, that will cost you in the end. Be patient and wait for the right person to come along. For me, I have a very strict no smoking no pets policy. Both will stink up / destroy your place. I also prefer a single person over a couple, or a couple with kids (less noise / destruction). I also don't take anyone on any kind of government subsidy. Be sure to check references from their previous landlord before you accept a tenant, as well as doing a credit check. Lastly, I ALWAYS ALWAYS ALWAYS make sure to have my renters sign a FIXED TERM contract, indicating that they will move out on a specific future date. I start with a short term like 3 or 6 months, then have them sign a new and longer fixed term rental agreement if everything works out, and keep renewing with new fixed term contracts as needed. That way, if there are ever any problems, then out they go when the current term is up. If you do a month to month contract, you need just cause to evict them, and "I can't stand them" is not considered just cause even when you own the place.


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## Fraser19 (Aug 23, 2013)

Thanks for all of the info.

The places I have been scouting are all completely separated. As in they have there own door to enter in and I would be able to lock the way into my part of the house so the person cannot gain access. Giving that I intend on buying a place that I can easily cover on my own salary I will be screening the person who is intending to rent thoroughly. 

Ideally I am hoping for a committed to education student who does not party or smoke. If I can't find the ideal person then I wont rent it. While I like the idea of 50% of my mortgage being paid by someone else, I am not into feeling concerned about the welfare of my home. 

Also a very clear fixed term contact would be the first thing I would get created.


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## m3s (Apr 3, 2010)

What ever happened to KaeJS? Looking at his thread history we have:

The primer Home Insurance + Tenants
The infamous "95% of renters are scum" Tenants "Fighting" with each other
The foreshadowing Kicking out a Tenant
The finalé Tenant wants compensation?


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## OhGreatGuru (May 24, 2009)

With the fall in oil prices a real estate crash in Alberta may not be far behind. So I would be cautious about investing in real estate until you know this cycle has hit bottom. And when it does, you may find there are no tenants to be had because all those easterners who lost their jobs have gone back home.

If you know nothing about being a landlord maybe you should do both yourself and your prospective tenant(s) a favour and remain a renter yourself.


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## Just a Guy (Mar 27, 2012)

You may want to read some of "none"'s posts...

A self described "ideal tenant" who made life hell for his former landlord...and didn't even quit after leaving.

As for not worrying about access, I onve had a tenant who broke through the wall of my condo into the neighbours while they were out...claimed to be looking for an escaped pet. They were quickly evicted.

Also, if your tenant knows how to play the system, they can stay for a lot longer than you think they can...the courts often side with them.


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## Davis (Nov 11, 2014)

Just so we're clear, the discussions with KaeJS were about roommates, not tenants. Different kettle and different fish. I was a landlord for a long time. It helped me pay down my mortgage, and get me started on the track that I am on to retire in 2016 before I turn 51. But i am really glad I am no longer in that business. Prepare yourself: rental income is not free money. Being a landlord is a real job, and you won't always get to choose your hours. Finding and maintaining tenants can take a lot of your time. Good tenants may leave for reasons that have nothing to do with you - getting a job somewhere else, losing a job, moving in with a boy/girlfriend, etc. Bad tenants may not leave willingly. Tenant problems can occur in the middle of the night or in the middle of the workday. Not being financially dependent on the rent cheque gives you a real advantage in finding tenants. Make sure you play that card well. And above all, get to know your responsibilities and rights as a landlord in Alberta. Find the relevant legislation or plain language guide to it, and learn it well. If you have to take legal action, you want to be sure that everything you've done is kosher, and that you know how to take each legal step as quickly as possible. Good luck.


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## CPA Candidate (Dec 15, 2013)

Yes you can deduct mortgage interest if it;

a) paid or payable within the year
b)arises from a legal obligation
c)is payable on borrowed monye that is used for the purpose of earning income from a business or property
d) is a reasonable amount

ITA: 20(1)(c)


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## Fraser19 (Aug 23, 2013)

OhGreatGuru said:


> With the fall in oil prices a real estate crash in Alberta may not be far behind. So I would be cautious about investing in real estate until you know this cycle has hit bottom. And when it does, you may find there are no tenants to be had because all those easterners who lost their jobs have gone back home.
> 
> If you know nothing about being a landlord maybe you should do both yourself and your prospective tenant(s) a favour and remain a renter yourself.


Lethbridge real estate is not as effected by oil costs as the rest of the province, most houses in Lethbridge as about 1/2 the cost of what they would be in Calgary. Also this process will likely start in 18 months so I feel my timeline is very realistic.


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## OnlyMyOpinion (Sep 1, 2013)

Lethbridge is a really nice town - all the amenities without Calgary's traffic. Keep the west wind in mind when looking at real estate (i.e. a sheltered or east facing backyard).


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