# Advice on my condo: Sell or Rent?



## Michelle83

So just wondering if anyone perhaps could offer some advice or their views on this. 

My situation...I'm 29 and own my condo outright. It'd estimate it would sell at around $205,000, which is pretty much what I paid for it (no appreciation). 

Right now condo fees + taxes is about $500. I'm going to be moving into a house with my boyfriend in January, so I have to determine what to do with this condo; whether I should sell it or use it as a rental. 

I'm pretty new to real estate rentals, but from what I'm reading it seems like it could be a viable investment strategy for the long term. I'm just uncertain of the tax consequences. 

If I rented it out, even short term, say 3-6 months, would it automatically be classified as a rental upon sale? And are the profits from the sale (if any) different than if I just sold it at this point? 

Or, if I was to keep it for the longer term, what would be my best strategy moving forward? Draw out the equity and perhaps buy 2-3 more condos in the 200 range, putting 50k down and letting a tenant pay out the remainder of the mortgage? 

So far I haven't done too much in the way of retirement planning as my main goal was to pay off my condo entirely and be mortgage free. I have some money invested in stocks, but it's really not doing so well (my dad manages the money as he's been investing on his own, full time, for years).


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## ddkay

From the date you convert principal residence to rental you have to pay capital gains or if it lost value you can deduct the loss... but you just said there's been no appreciation, so there are no tax consequences.. Rent it out, hopefully you can get at least $1500/mo for it.


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## Sampson

ddkay said:


> From the date you convert principal residence to rental you have to pay capital gains or if it lost value you can deduct the loss...


Not true. The gains or losses are no realized until the property is sold. There are multiple reasons when a principle residence is either no longer considered the principle residence, renting it out automatically triggers this conversion.


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## ddkay

They aren't realized on the date of conversion but when you sell it goes back to the date of conversion..


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## kcowan

Just remember that becoming a landlord is adding a new job to your daily work. After that, you can work like hell and buy multiple rental dwellings. But one condo at a time is pretty inefficient. It would be more strategic to buy multi-unit rental buildings.


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## the-royal-mail

Sell it and do *NOT* buy "2-3 more condos"...my goodness, no, anything but that.

Consider the monthly cost of ownership including condo fees, taxes, interest, mortgage, insurance and repairing broken things when your tenants call. Also add the cost of property management if you go that way.

My suspicion is that you'll be way behind the curve if you keep that. As well, what do you know about landlording?

IMO the risks are far too high for you and you'll probably be losing money anyway.

Sell it now and live your life.


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## ddkay

Mutli-unit rental buildings lol. OP said they already have a full time job. Do not recommend looking for a new one. If time spent isn't minimal (won't take long to find out), then sell, it's not worth the trouble. There is nothing wrong with renting a principal residence while you aren't using it. Meanwhile, it's extra income.

OP is moving in with a boyfriend, not husband... if things don't work out (X fingers they do), at least OP has a place to go back to in the future, without eating up what's left of the $205K to pay someone else rent

Assuming the condo isn't a mould infested dimly lit slum dump, you took care of your appliances, and tenants are screened properly, there shouldn't be broken things. Use common sense. Make sure everyone is insured.. find out what your condo policy covers, most cases it's everything except personal possessions. Your tenant will need tenant insurance for their possessions, the cost is minimal, they pay out of their pocket, and it's legal for landlords to ask for proof of it...


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## Murph

How much can you rent it out for ?


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## Chris L

Itemize your cashflow and then I'll tell you very easily what to do.

Most like I'll tell you to sell. If you're on a forum trying to decide, being a landlord is most definitely not for you.


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## Mall Guy

ddkay said:


> OP is moving in with a boyfriend, not husband... if things don't work out (X fingers they do), at least OP has a place to go back to in the future, without eating up what's left of the $205K to pay someone else rent


The cynic in me wanted to say almost the same thing . . . sell the condo, invest the cash . . . nice little nest egg, and you will never have to feel trapped in a relationship . . . don't co-mingle the funds and move out just before becoming a common law couple :biggrin:


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## Michelle83

ddkay said:


> OP is moving in with a boyfriend, not husband... if things don't work out (X fingers they do), at least OP has a place to go back to in the future, without eating up what's left of the $205K to pay someone else rent


Yes, this was part of the consideration not to sell just yet. I want to see how things go with him and the move and make sure we're solid. I love this place and hate to lose it if I had to come back. That said, my brother can stay here and pay minimal costs for a few months, after which I could rent it out to someone else for a higher price or sell. 

In terms of the whole idea of being a landlord and time commitment, if I went the route of having a management company handle things, that would pretty much relieve me? I contacted one a while back and they were taking 10% of the rental price for fees. Or is it much better to do it yourself? 

I would have lots to learn, that is pretty clear. 



Chris L said:


> Itemize your cashflow and then I'll tell you very easily what to do.


So this is going to be a stupid question and illustrate how new to this I am, but what do you mean itemize? Right now my condo fees are $315, property tax is $125. 

Part of me just feels a bit lost for direction financially at this point in my life. I worked really hard to get the big downpayment and pay this off, but I'm not sure what my best strategy is for the future. 

The original plan was to just drop 300k or so down on a down payment for a future house (I've always wanted a pretty nice house...my long-term goal so to speak), but I'm starting to rethink that plan. 

Also I heard that even if you sign a pre-nup, the marital house automatically would get divided in half upon a divorce. Obviously I'm hoping no divorces are in my future, but if I put down that much... I would want that much, or more, back.


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## Sherlock

I'm not sure about the wisdom in keeping the condo so you have a place to move into in case it doesn't work out with your boyfriend. If a condo owner wants to self-occupy their rental condo, they have to serve the tenant with an N12. If the tenant just signed a 1 year lease, you can't kick the tenant out until the end of that lease even if you want to move in yourself. If the lease is over and you're on month-to-month, then the tenant still gets 60 days from the time they get the N12. So you could potentially be waiting up to a full year for your tenant to move out before you can move in yourself (maybe longer if your tenant tries to protest the N12).


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## MoneyGal

Michelle83 said:


> Also I heard that even if you sign a pre-nup, the marital house automatically would get divided in half upon a divorce. Obviously I'm hoping no divorces are in my future, but if I put down that much... I would want that much, or more, back.


Then don't buy a house with a spouse. Or don't buy a house with a spouse who isn't putting down the same amount of money. Or buy a house with a spouse, but only put down the same amount he/she is putting down, so that you get "the same" amount of money back if/when you divorce (realizing this will cost you in interest you would not otherwise pay, but will protect you from losing the money you put down). Or don't get legally married, so there's no matrimonial home to divide.


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## ddkay

Obviously wait until their lease expires. They are paying, right? Use that money to rent somewhere else, and the home equity doesn't get touched outside market forces

It just seems like a safer bet than using the nestegg to rent, or putting the nestegg into the stock market and being forced to liquidate to repurchase another home when the stock market is down. She says it rents for $1100-440 expenses, the condos value shouldn't drop $7920 a year unless it's a slum condo or terribly mismanaged.


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## Sherlock

ddkay said:


> It just seems like a safer bet than using the nestegg to rent, or putting the nestegg into the stock market and being forced to liquidate to repurchase another home when the stock market is down.


Assuming you had your money tied up in stocks and wanted to buy a house, why would you be forced to sell your stocks when they're down in order to buy a house? Wouldn't you just rent for a while longer until the market came back up? I mean, no one is ever forced to buy a house by a particular deadline, right?


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## ddkay

You would be forced to keep renting and burning capital if you don't want a loss, which may end up as a loss anyway, there is no other option. In my scenario, you're not burning up capital on rent, and if the market corrects, instead of waiting for a recovery, you only wait until the tenant lease expires, meanwhile the tenant is subsidising half or all (e.g. basement apartment) of your accomodations before you move back in. If the relationship works out, she moves in permanently with her partner, starts sharing expenses etc, ontop of allocating a personal % of household income towards investments, she can also redirect positive condo cash flow there. If the market crashes, OP gets a pay cut, someone loses their job, at least they have a roof to live under and alternative sources income to weather the storm in the forms of rent & stock dividends.


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## Michelle83

Sherlock said:


> I'm not sure about the wisdom in keeping the condo so you have a place to move into in case it doesn't work out with your boyfriend. If a condo owner wants to self-occupy their rental condo, they have to serve the tenant with an N12. If the tenant just signed a 1 year lease, you can't kick the tenant out until the end of that lease even if you want to move in yourself. If the lease is over and you're on month-to-month, then the tenant still gets 60 days from the time they get the N12. So you could potentially be waiting up to a full year for your tenant to move out before you can move in yourself (maybe longer if your tenant tries to protest the N12).


That's good to know. I would likely have my brother stay in the condo paying the condo fees + taxes until I was pretty sure things were going well with the move with my boyfriend. Then I'd look at renting to a tenant so the chance of wanting to move back would be quite low. 

I didn't realize that the pre-nup laws were as they are until talking to a friend who's a lawyer recently. I always thought as long as you had a pre-nup, you could claim the portion of the house investment that was yours. But it appears at least here in Alberta that's not the case. Or that's what she said anyway. 

It kind of puts me in a bit of a hard place because I did want to have a decent down payment to bring down the monthly mortgage; or that was the original goal anyway.


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## MoneyGal

The matrimonial home is a special piece of property that gets created with legal (not common-law) marriage. What you are saying in your posts is not quite correct: upon divorce, the *proceeds* of the matrimonial home must be split equally between the spouses (calculated at FMV if the house is not actually sold on the separation date). (Also, this sum is equalized between the spouses. If there is matrimonial debt, that is split too.) In theory, if you contribute $100K as a downpayment, and your spouse contributes nothing, and you sell the house for $200K, you would split the $100K in profit (after expenses and any other matrimonial debt) and retain your $100K downpayment. 

Marriage laws in Canada are federal but the division of matrimonial assets is an area of provincial jurisdiction under provincial family law acts. However, the matrimonial home and the right of both spouses to occupy and benefit financially from any gain in the value of the matrimonial home applies all across Canada.


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## Chris L

How much can you get in rent? Assume your maintenance will be at least $150-$250/month. You might put in (on average 3-4 hrs a week of time dealing with showings, maintenance, taxes, collecting money, etc., etc.). Now what kind of return are you getting on your money? Is it worth it?

If you buy another place, make sure you have an extra room with bed, etc. to rent to your buddy. Have a lease, charge rent. Then it's not common-law....for a time anyway. Does the law cover friends-with-benefits yet? lol


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## MoneyGal

Chris L said:


> How much can you get in rent? Assume your maintenance will be at least $150-$250/month. You might put in (on average 3-4 hrs a week of time dealing with showings, maintenance, taxes, collecting money, etc., etc.). Now what kind of return are you getting on your money? Is it worth it?
> 
> If you buy another place, make sure you have an extra room with bed, etc. to rent to your buddy. Have a lease, charge rent. *Then it's not common-law....for a time anyway*. Does the law cover friends-with-benefits yet? lol


No issue when there's no legal marriage; there's no matrimonial home to be split if they aren't actually legally married.


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## Chris L

Right, but it's a good way to have them contribute...good way to get ride of them too. If it's shared kitchen/bath, etc, then the tenant act doesn't apply (Ontario).


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## Michelle83

MoneyGal said:


> The matrimonial home is a special piece of property that gets created with legal (not common-law) marriage. What you are saying in your posts is not quite correct: upon divorce, the *proceeds* of the matrimonial home must be split equally between the spouses (calculated at FMV if the house is not actually sold on the separation date). (Also, this sum is equalized between the spouses. If there is matrimonial debt, that is split too.) In theory, if you contribute $100K as a downpayment, and your spouse contributes nothing, and you sell the house for $200K, you would split the $100K in profit (after expenses and any other matrimonial debt) and retain your $100K downpayment.
> 
> Marriage laws in Canada are federal but the division of matrimonial assets is an area of provincial jurisdiction under provincial family law acts. However, the matrimonial home and the right of both spouses to occupy and benefit financially from any gain in the value of the matrimonial home applies all across Canada.


Thanks very much for your response! This is interesting. The impression I got from my friend was that if I put down say 200k on a home, we got married and then eventually sold it for 450k say, we would each walk away with 225k (assuming the mortgage was paid off). 

So you're saying that I would get my 200k back, and then we would divide up 250k, him getting 125k and me getting an additional 125k? 

I just want to be sure as this significantly puts my mind at ease for putting down a larger down payment on a future home. 




Chris L said:


> How much can you get in rent? Assume your maintenance will be at least $150-$250/month. You might put in (on average 3-4 hrs a week of time dealing with showings, maintenance, taxes, collecting money, etc., etc.). Now what kind of return are you getting on your money? Is it worth it?


If that was the time of time investment, it wouldn't work at all as we'll be moving to a city three hours away. I had spoken to a few other people and they made it seem like it wasn't all that much work at all as long as you had a good tenant, apart from the initial screening process, etc. I guess it's been an eye opener how much work is involved. I guess I could always go the management company route.


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## MoneyGal

Ugh. My bad. Your friend is right. The proceeds are split. The downpayment is added to the total proceeds, which are split equally. My example is wrong.


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## Cal

MoneyGal said:


> Or don't buy a house with a spouse who isn't putting down the same amount of money.QUOTE]
> 
> Great advice, it does err on the side of caution, and would be fair to both parties.
> 
> My advice from your post is more in regards to your investments. You may want to hire a fee only advisor for a consultation, to discuss how your investments could achieve a greater return. We have went through a great rally since 2009, so it is a shame that it doesn't seem that your current investment plan is doing too great.
> 
> I am sure that the investment advisor is giong to tell you to sell the condo and diversify some of your investment $'s outside of RE.


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## Xoron

MoneyGal said:


> Ugh. My bad. Your friend is right. The proceeds are split. The downpayment is added to the total proceeds, which are split equally. My example is wrong.


to the OP: I know you're in AB, but this is how it works in Ontario (and I'm surprised if it would be different in AB) for MARRIED couples.

If one spouse puts a large downpayment on the marital home (from funds accumulated prior to marriage), then that amount (plus interest of some agreed upon amount) is subtracted from the selling price and the remaining equity is split.

An example to make it easier:
House Cost: $500,000
Spouse 1 Downpayment Contribution: $200,000
Spouse 2 Downpayment Contribution: $50,000
Mortgage on the remaining: $250,000 (just for clarity's sake).

Lets say after 10 years they divorce. The house is worth $700,000 with $100,000 mortgage.

So the TOTAL equity in the home is:
$700,000 - $100,000 = $600,000

Spouse 1 is first entitled to $200,000 +interest before any division of the proceeds and Spouse 2 is entitled to $50,000 + Interest. To make it easy, lets assume 0% interest.

So $600,000 - $200,000 - $50,000 = $350,000 equity remaining.

So each Spouse walks away with an additional $175,000.

Spouse1 has a total of $375,000 in their pocket.
Spouse 2 has a total of $225,000 in their pocket.

Hope that helps.


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## Michelle83

Thanks again for the replies. 

Okay, so now I'm really confused.  

If Moneygal is correct, then I should likely not be doing a large down payment, or well, thinking very hard about it beforehand. 

But if it's working exactly how Xoron says, then that is my ideal situation and would relieve all my fears... I just always thought as long as you had a pre-nup you could say who's getting what. It's too bad they treat the marital home differently. 




Cal said:


> MoneyGal said:
> 
> 
> 
> Or don't buy a house with a spouse who isn't putting down the same amount of money.QUOTE]
> 
> Great advice, it does err on the side of caution, and would be fair to both parties.
> 
> My advice from your post is more in regards to your investments. You may want to hire a fee only advisor for a consultation, to discuss how your investments could achieve a greater return. We have went through a great rally since 2009, so it is a shame that it doesn't seem that your current investment plan is doing too great.
> 
> I am sure that the investment advisor is giong to tell you to sell the condo and diversify some of your investment $'s outside of RE.
> 
> 
> 
> Yes, I think I need to sit down with someone and really talk things over and come up with a clear strategy. When I have a plan, I'm really good. Right now I just feel really lost. I've just seen the few stocks I have that my father invests do so poorly, along with his, and stories of others, it's tainted me a bit. And it seems that the safer investments pay so little.
> 
> I guess I'm just struggling to see how people can get ahead, especially after inflation is factored in.
Click to expand...


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## MoneyGal

Xoron said:


> to the OP: I know you're in AB, but this is how it works in Ontario (and I'm surprised if it would be different in AB) for MARRIED couples.
> 
> If one spouse puts a large downpayment on the marital home (from funds accumulated prior to marriage), then that amount (plus interest of some agreed upon amount) is subtracted from the selling price and the remaining equity is split.
> 
> An example to make it easier:
> House Cost: $500,000
> Spouse 1 Downpayment Contribution: $200,000
> Spouse 2 Downpayment Contribution: $50,000
> Mortgage on the remaining: $250,000 (just for clarity's sake).
> 
> Lets say after 10 years they divorce. The house is worth $700,000 with $100,000 mortgage.
> 
> So the TOTAL equity in the home is:
> $700,000 - $100,000 = $600,000
> 
> Spouse 1 is first entitled to $200,000 +interest before any division of the proceeds and Spouse 2 is entitled to $50,000 + Interest. To make it easy, lets assume 0% interest.
> 
> So $600,000 - $200,000 - $50,000 = $350,000 equity remaining.
> 
> So each Spouse walks away with an additional $175,000.
> 
> Spouse1 has a total of $375,000 in their pocket.
> Spouse 2 has a total of $225,000 in their pocket.
> 
> Hope that helps.


I know this is exactly what I originally wrote, but it is incorrect. (Backstory: I did not have a prenup, but did have an unequal division of property in my own divorce. I confused my case with the general case. Any person can go to court and apply for a variance of the division of matrimonial property, but the law is very clear.)

S. 5(1) of the Ontario Family Law Act provides that 

_When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them. R.S.O. 1990, c. F.3, s. 5 (1)._

The basic message I would take from this is that you need legal advice to understand the potential impact of divorce in your own province and given the situation you are anticipating. You might consider paying for advice as opposed to talking with a friend. 

Here's a random Google link which confirms the point I am making: http://www.divorce-canada.ca/property-divorce-laws.htm

Another random link: http://www.canadiandivorcelaws.com/property-divorce-laws/


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## Four Pillars

Michelle, have you already bought a place with your boyfriend? If you've never lived together, why don't you two just rent a place. Regardless of the whole matrimonial home/unequal down payment issue, it's far easier to split if you are in an apartment.

I believe that is what most couples do, unless they move into a home that is already owned by one of the partners.


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## Berubeland

Renting and managing a condo from 3 hours away should be fine. The crucial and time consuming part of the process is the renting of the apartment. The phone calls, showings, applications can take a lot more time than you'd be comfortable with. 

In every condo there usually seems to be a defacto handyman, so get their number before you go in case something breaks. 

You should read up on the laws in Alberta, before you decide http://www.servicealberta.gov.ab.ca/landlords_tenants.cfm at the bottom of that page there is a link to a guide. 

There is always a risk of a bad tenant, so that is something you should be prepared for if it comes to that. But 90% of tenancies are not problematic.


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## Chris L

I'm gonna stick with buying a place yourself and renting to boyfriend. I did this with my now wife and it works just fine. You might even have boyfriend contribute a fair market amount for "rent." If you get married and it all works out, then no problem, you can agree to share the equity evenly. If not, then he was never your true spouse and he rented from you as his landlady. No worries, all is fair. If you rent a room to him, then he's not going to inadvertently turn into a common law spouse as he would if you shared a room.


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## Michelle83

Thanks again for all the replies. Yes, it'll definitely be a good idea to speak with a lawyer I think to get everything in place. I"m just really happy to hear that it is in fact possible, with the right steps taken, to protect my money if it went in as a down payment. From speaking it her, it seemed like basically if I put it down, he's entitled to half and there's no way around it. 

All of this would be for a future home down the line though; it's him who's set on buying right now and I told him I didn't feel comfortable at this point getting into any mortgage together (I want to wait until we're at least engaged), so we said I would rent from him for the time being... definitely a better in my mind. But I think I convinced him last night renting is the better route to go for now anyway as he's really not going to get what he wants with the down payment he has saved up. 

This way we can rent, and if engagement does come (I could see it coming in the next 6-12 months), then we can look at buying a bigger and nicer house together and I'll put in my downpayment. 

Thanks also for the link to the laws... I'll check that out. I think I need to do a bit more reading on everything to really get an idea of what's all involved. I know I want to start investing my money more, it's just figuring out the best way for me to do so.


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## Michelle83

Sorry, I just had one more question on this scenario now. So we've decided to just rent in the new city for a while, we'll see how things go and if things are working well, I"ll look at selling my condo. 

Now, let's say we were going to get into a townhouse in 6-12 months, live there for 2-3 years and then move on to buy a bigger longer term house. He wants to at that point turn the townhouse into a rental property. 

We talked about each of us putting the same amount down on the townhouse (50k each) for the down payment. But, would this be the right thing to do if he wants to turn it into a rental? or would it be better for him to buy the house, have everything in his name and me still rent off him? 

Does most people who are married and invest do so together or separately?


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## the-royal-mail

Michelle83, please note it is not necessary to quote everything you reply to. You can simply type your reply and address the person by ID if need be. We've already read their comments in this threaded view and all the extra quoting is causing unnecessary scrolling.


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## Four Pillars

Michelle83 said:


> Sorry, I just had one more question on this scenario now. So we've decided to just rent in the new city for a while, we'll see how things go and if things are working well, I"ll look at selling my condo.
> 
> Now, let's say we were going to get into a townhouse in 6-12 months, live there for 2-3 years and then move on to buy a bigger longer term house. He wants to at that point turn the townhouse into a rental property.
> 
> We talked about each of us putting the same amount down on the townhouse (50k each) for the down payment. But, would this be the right thing to do if he wants to turn it into a rental? or would it be better for him to buy the house, have everything in his name and me still rent off him?
> 
> Does most people who are married and invest do so together or separately?


I'm not an expert at all on this stuff, but I don't see how you renting from your husband will nullify the 'matrimonial home' scenario. You're married, you are living together - how is that not the matrimonial home?

Keep in mind, that if you split up, you don't have to involve the courts and the laws, so if you two agree that the townhouse is "his" then there won't be any problem. However, if you don't agree - that's where the lawyers and laws come into play. I would think that if you contest it, you would be easily able to prove that the townhouse is the matrimonial house and you could get half.


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## MoneyGal

The question is, what is worse...divorce, or unnecessary scrolling? I can't tell anymore. 

My own thought on this is that whether or not you legally marry a person with whom you have a "spouse-like" relationship - you should be pretty confident in the relationship before you buy property together. And pretty clear what the implications of joint ownership of property OR joint occupancy of property would be. 

This is the time for a pre-nup - you don't have to ever get married in order to create a pre-nup. It is an agreement made in contemplation of marriage, and it could be useful if you disagree with the standard legal provisions which would apply in the case of legal marriage and in the case of common-law marriage. If you're good with the legal provisions as is - although I don't know that you are clear what they are, and you've been given conflicting advice (even conflicting advice from one person, me) in this thread - then you don't need to do anything. But right now it sounds to me like you are doing too much hedging and wondering. Are you sure you want to intermingle your finances with this other person?


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## kcowan

Michelle
I think you and this other person do not see eye-to-eye on a number of things like owning rental property. I would spend more time discussing those differences of outlook rather than working out ways to protect yourself from it.


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## Four Pillars

MoneyGal said:


> The question is, what is worse...divorce, or unnecessary scrolling? I can't tell anymore.


Lol.



MoneyGal said:


> But right now it sounds to me like you are doing too much hedging and wondering. Are you sure you want to intermingle your finances with this other person?


Exactly. For now, I would just rent with him and see how that goes. See if you get married, buy a house etc.

By the time you are ready to sell/rent out your first house, you will probably be a few years into your marriage. By that point, shouldn't it be a joint effort?


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## sprocket1200

sell, fast....!!!


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## Michelle83

Thanks for all the replies. That's all very true. I think I just get a bit anxious/stressed as he's not nearly as calculated with his money as I am, nor does he save or manage his money as well, so it makes me a bit worried about what could happen. I also am not sure I'm set on rentals yet from everything that was said; he seems much more so. I'll talk with him more about my fears/concerns. I know money is such a problem in so many relationships, my parents fight about it constantly, and part of me worries it may be much the same with him.


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## Square Root

Sounds like you have a good handle on the important issues. Good luck in your decision.


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## dvelecka

For the most part, Canadians are in favour of home-buying, as two-thirds of Canadians own their own homes. This strategy is often viewed as a safe one and wise retirement savings vehicle, but this is not always the truth. The biggest factor to consider is the mortgage rate a homebuyer gets in order to finance their home. With amortization rates at 25-year for payback, home owners now have to pay back their mortgage at a much quicker rate, reducing the amount that they are able to borrow overall. Also, consider timeframe. Online mortgage calculators are a helpful tool to make long term projections when deciding whether or not to rent or buy. Especially over the short term, a look at the numbers show that renting is often a better option for many people.


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## andrewf

Unnecessary scrolling is definitely worse than divorce.


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## thompsg4416

*Capital Gains on rental Unit*

Quick question related to this thread. I recently moved over seas and I am renting out my condo. Before leaving when it was still my primary residence I put down 30k on my mortgage. My question is when I move back and possibly sell it in the next 1-2 years will I pay capital gains on the whole amount or just the part of capital gains incurred since it became a rental property.

I.E When I left and it stopped being my principal residence I owed approx 120k. When I return and I'll owe approx 100k.

I will sell the residence for approx 230k. 

What portion do I pay capital gains on? 

Thanks!


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## kcowan

thompsg4416 said:


> What portion do I pay capital gains on?
> 
> Thanks!


Several points:
The time the place was empty before being rented counts as your PR (up to a year)
The rental revenue was taxable and you could claim depreciation against that income = D
Capital in= $30k and $20k (mortgage reduction)
Property appreciation while PR and empty = X (- D already claimed)
Selling price = $230k
Maintenance costs such as repainting = Y
Selling costs = Z
Capital gain = 230-Z-Y-X+D-50
Taxable CG = .5 x CG


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## thompsg4416

So if i follow that properly I only pay capital gains on the gains after the tenents moved in

Only one question.. Capital gain = 230-Z-Y-X+D-50

the -50.. you came up with that by adding up my capital in?

Thanks Kcowan!

G.


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## kcowan

thompsg4416 said:


> Only one question.. Capital gain = 230-Z-Y-X+D-50
> 
> the -50.. you came up with that by adding up my capital in?


Correct (20+30)


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## peterk

I got a better idea Michelle; ditch that boyfriend and come hang out with me. He can take my girlfriend, she's a spending fiend.
Where you living, girl? 

Seriously though I'd sell the condo. Having your brother occupy for a few months sounds like a great idea however, in case you leave your boyfriend or he kicks you out. On top of that if it's 3 hours away it just makes the decision all the easier. I may have missed it but have you posted the expected rent amount? Unless you're making nearly 10% or more on it it's probably not worthwhile as an investment property in ANY situation...


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