# Renting out Primary Residence



## umssyed (Jul 25, 2016)

Hello everyone,

If I rent out my primary residence, what are the implications? My mortgage broke has mentioned that it is completely ok and that a lot of people do that. 

Do I have to fill in some special forms when doing my taxes?

Has anyone done this before?

Thank you


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## Berubeland (Sep 6, 2009)

You should get it appraised to set the value before turning it into an income property.


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## DavidW (May 27, 2016)

Appraisal is a good idea. You may want to consider not claiming some of the 'normal' tax credits for an income property.


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## Eclectic12 (Oct 20, 2010)

Then too, where one has converted to a rental property at commercial rates ... likely one will have to pay capital gains tax on the rise of the property value.
http://www.taxtips.ca/personaltax/propertyrental/rentalexpenses.htm

If one buys at say $100K, then get an appraisal for $160K then rents out for say fifteen years. At that point, whether one sells or converts it back to a principal residence where the market value is $450K, one uses Schedule 3 (I believe part 4) to report $450K - $160K for a capital gain of $290K.

Each year one is making rental income, one is reporting on one's tax return the rental income/expenses on form T776 "Statement of Real Estate Rentals".


Cheers


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## Mukhang pera (Feb 26, 2016)

A further consideration is insurance. You should advise your agent that you intend the property to become rental. It will depend on the language of the existing policy, but it may well be that the existing policy contemplates owner occupation and the insurer will perceive the risk in a different light for a rental.

Also, I'll assume that renting the premises is permissible to begin with, eg., it is not a condo in a building that restricts rentals.

You have asked about "implications" and then raised taxation as an issue. That is but one "implication", insurance coverage is another and then there's the whole Pandora's box of landlord/tenant law. Your post suggests you do not have long experience as a landlord and you might want first to get up to speed on the residential tenancy law of your province and how it is administered.

You mentioned having a word with your mortgage broker who has given his/her imprimatur. Très reassuring. Many lenders will seek a higher down payment and/or a higher interest rate in respect of a rental property being purchased with the mortgage proceeds. If you have a mortgage it might contain a provision about change of use. If it does, you can keep quiet and maybe the lender won't find out or will do nothing even if aware of the change of use. An abundance of caution might suggest a review of the mortgage terms.


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## Just a Guy (Mar 27, 2012)

Generally speaking a home often makes a poor revenue property. The amount of value locked up in the property often makes the cash flow not work very efficiently. 

Then, there are the emotional issues. If you have fond memories in the house, seeing it trashed by tenants can be much harder than had you had no emotional ties to the place. 

Usually, if you want to get into rentals, it makes more sense to sell your house and buy places that are rental properties.


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## gardner (Feb 13, 2014)

When we moved house we kept the old property as a rental. I obtained a professional appraisal to set a capital gains baseline and changed the insurance to cover a rental property.


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## kcowan (Jul 1, 2010)

Your contents insurance should be changed to cover just appliances (if included), and the rental agreement must specify that insurance coverage for contents and liability is the renters responsibility. Make sure that the damage deposit is the maximum allowed.

Spell out response times for various items needing repair.


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## twa2w (Mar 5, 2016)

Berubeland said:


> You should get it appraised to set the value before turning it into an income property.


A good idea but not really necessary if you don't want to spent the money.
You can do it by 
Total years of ownership - ( years as prin residence plus one)
Then divide this number by Total years owned to get % of years as a rental.
Multiply your total gain by this % to get cap gain attrubutal to rental period.

Of course this only averages out your gain. If you think you have a big gain in your house and house prices are going to flatten out or drop then pay for an appraisal.
Beaware that appraissers often charge a premium to individuals for appraisals so you may pay much more than you would if you went through a bank.


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