# Is a furnished rental apartment/room considered commercial.



## LandlordToBe (Jul 12, 2016)

Hi. I am from Ontario Canada. With my pension rising at 1% per year and home bills (property tax, hydro, natural gas heat, house insurance) rising at 4% to 14% per year I am considering renting a room in my house to cover these costs (maybe two rooms). I decided not to when I realized that renting to tenants is capped at 1% to 2% while bills rise at 4% to 14% (how can anyone keep it up). However someone recently told me that if I furnish the room fully (bed, desks, dressers, etc) it is considered commercial. He said that this has two advantages. 1/ you are not restricted to the 1% to 2% inflation rental increase guidelines each year and 2/ you can evict a none paying or bad tenant more easily. The person who told me this is a person who was involved with renting commercially for all his life so I got interested. I was thinking that if this is true I could charge a rental rate of the previous years annual bills divided by 12 for the monthly rent. I figured this would attract tenants because it is actually fairly low and also it would allow me to simply charge the amount of the bills each year this way protecting me from inflation. I have been searching google all night for information on this without success. Does anyone know if what I am being told is true and if so where I might get more information on it.

Thanks,
John


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## OnlyMyOpinion (Sep 1, 2013)

See if this fits your situation. Please note that I'm only providing you with some links - no warranty that they are current or correct I'm afraid:
http://www.landlordselfhelp.com/education/forum_q_a.asp?sub_id=63&sub_catid=1&sub_name=Exemptions
and
http://www.landlordselfhelp.com/facts/2007_sharing_kitch_bath.pdf
and
http://www.legalline.ca/legal-answers/do-tenants-have-rights-if-they-only-rent-a-room/


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## LandlordToBe (Jul 12, 2016)

Thanks for your fast reply OnlyMyOpinion. I will read them tomorrow morning when I am a little more alert. Time for bed. Have a great night. John


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## Just a Guy (Mar 27, 2012)

As a longtime landlord, I'd never allow tenants to rent in my house, with access to all my stuff. There are way better ways to make money with lower risk...like say placing everything on black at the roulette wheel...50 times in a row.


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## LandlordToBe (Jul 12, 2016)

Yes I guess renting rooms in my own home has a risk factor. Regarding risk here are some interesting calculations to try if you know Microsoft Excel.

I ran a spreadsheet out 40 years (age 62 to age 102). It had 3 columns per bill/expense [[A cost of a bill increasing at lets say 7%, A cost of income increase at 1% (pension or rental income), the difference between the two]]. So I totaled the difference column at the top. I ran four of these (One for Tax, One for Hydro, One for Natural Gas, One for house insurance). Because I was using pension income I also included car insurance which last year jumped 17% but has had a few years of no increase so I gave it 8%. So I totaled all five difference amounts on the rows on the left and I totaled all the differences (the shortfalls) at the top. So the total shortfall over 40 years was 2.3 million (the magic of compounding). So I decided to figure out when my cash savings was wiped out. It was wiped out at age 80. So one could fight this by investing in Bell Stock at 5% dividend I suppose. However I figure a business should cover all costs and make a profit rather than use other methods to make up for running a poor business (why not do both). So the occasional theft would be considered just another cost. So I decided to run something similar by selling my house and putting the total money into Bell stock at 5% dividend and renting an apartment which only goes up 1.6% a year. This was obviously the smarter move money wise and labor wise but I was hoping to pass the house on to my daughter and lets face it a house is a nicer place to live than an apartment (at least my house is).

One thing I could do is put locks on doors. In these rooms I could protect the more valuable stuff like computers, tools, etc. Another technique is to charge below market which tends to cause people to not want to ruin a good thing by stealing ($100 saved per month can buy a lot of stuff).

So all and all I think renting in the house is a lot better than a short fall of 2.3 million. But I have just started reading so I can not say for sure yet. I hope to find out if I can charge the amount of last year's bills to avoid loosing the 2.3 million or am I restricted to rental increases of 1% to 2% forcing me to pad my rent higher hoping they don't stay forever like my very smart friend does (he is 64 and has lived in 2 apartments all his life)?


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## OnlyMyOpinion (Sep 1, 2013)

I agree with JAG that renting a room in your house is not ideal. You might get lucky with a roomer but you might not. Your personal living space, privacy, etc. will change greatly. 
I wouldn't suggest charging lower room & board to prevent pilfering, it is just as likely to bring in someone in greater need.
It sounds like you have done some projections and are not in dire need of implementing r&b right away. 
I assume you will have CPP and perhaps OAS - they both provide cost of living increases. 
I don't think we should assume utility-type costs will increase at high rates forever. We see bumps with things like the carbon tax, etc. 
In short, keep considering your retirement income options and see what else might work.


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## Just a Guy (Mar 27, 2012)

If you only look at one solution to a problem, it will always look like the obvious choice.

First off, being a landlord is work, it requires skills and knowledge you need to develop. Starting at your age is probably not that wise. Besides, how are you going to do it when you're in your 80's and 90's?

As for leaving something to your kids, while its a nice thought, you may not be in a position to do it as you've pointed out. Your poor planning when younger, no offence intended, has consequences. As Mic jagger would say "you can't always get what you want". 

There is much more to fear than theft. Violence against the elderly is quite common. There are plenty of professional con artists out there as well.

If you really want to get into investing, there are other options. For example, you could get a heloc and buy stuff that makes more money than the interest rate, but buying investments takes some knowledge that you probably haven't developed. It's not as easy as I'll just buy bell stock because it always goes up...

People liked to think that about Apple. Admittedly, it is a great stock but, once it became the most valuable stock in the world, did it really make sense to think it would continue to grow? Many thought so and were surprised when it pulled back...they had all sorts of arguements as to why this shouldn't happen, all of which ignored the fact that it was worth more than any other publicly traded company in the world. Personally, I like apple and still do, but I wasn't surprised when it pulled back. 

If you really want real estate, you could buy a couple of cheaper rental places (notice I talk about rentals as opposed to homes). If you know what you are doing, you should be able to find a couple of places where, once you put down 20% from your heloc and get 80% mortgages on them, you should be able to make enough to still put money in your pocket after paying off everything while also paying off the equity...who knows, by 102, if you haven't had to liquidate everything to pay your medical bills and have retained all your abilities, you could leave your daughter three places...


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## Mukhang pera (Feb 26, 2016)

L/LTB,

Nothing wrong with the advice already given here.

As far as putting in some furniture and making it "commercial", that's "commercial" as opposed to what? I gather it is perceived as a way of doing an end run around residential tenancy laws. It may be the law of Ontario that furnished rental units are exempt from such laws, but that would surprise me. Kinda' reminds me of the good old days in Vancouver, when rent control applied to 1 BR units renting for $300 or less, 2 BR units renting for $350 or less and 3 or more BR units renting for $400 or less. Some saw the way around it as saying, for example, "The rent is $300. But the unit comes with a coffee table. The rent for the coffee table is $80/mo."

If you are renting a room in your house and your renter has access to other parts of the premises, such as shared kitchen, bath or just about anything else, then what you have is not likely a tenancy. Under B.C. law it would not be. You would be creating a licence agreement, not a tenancy agreement, a hallmark of which is a right of exclusive occupation. In the case of a licence, the rent, rent increases and just about anything else are all at large and not subject to regulation. 

Some years ago, when I was living much of the time on another continent, I was a residential licensee. I had rented out the Vancouver house I owned. I just needed a sleeping room and access to a kitchen when in town and a place to park my car all the time. I rented from a woman who was renting a 3 BR townhouse. She was the tenant of the whole. I never knew who was the L/L. She rented one room to me and another to someone else. In that case, each room had an ensuite bathroom, but the three people living in the place shared the kitchen, living room, etc. It was in the days before cell phones and she had a landline we all shared. When the bill came in each month, the 2 of us who were roomers would pay our own long distance portion of the bill. My licensor operated this way for years, probably still at it. It was her policy that, if a roomer departed, she would advertise the place and she and the remaining roomer would interview for the person to fill the empty space, the idea being that there should be a certain compatibility. House rules included each of the 3 occupants being required to vacuum the whole house once a week. I was largely exempt from that rule, being offshore so much.

The person who was my L/L in the above scenario told me she operated that way as it allowed her to rent what would be today a $5,000 or so a month house in a nice part of town. She needed the income from the 2 rooms to pull it off. She never made full financial disclosure to me (no reason why she should, and I never asked), but my guess is that she set the rents at a price that saw the rent she paid under the head lease (so to speak) subsidized by her roomers. In short, it worked for her.


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## LandlordToBe (Jul 12, 2016)

Thanks for all your advice. I have read each one once and I will read them a few more times until I fully digest what has been said. As far as learning goes, no doubt I would have lots to learn (I am use to this kind of thing actually and at 62 the mind seems to still be working well). If I decide to go ahead I would allocate 4 hours a day to learn it, set it up and yes I am not in immediate need so I would not go ahead until I felt everything was ready. Years back I did an extensive investigation of security systems and in the end I learned that they don't buy your belongings security since entrance through a door is measured in kicks and 6 kicks is the max to open pretty much any door. In the end I didn't bother since insurance is your only real protection (they can clean the place out of significant valuables before the police get there). I actually knew someone where they put a van in the Garage, closed the door and spend a few hours at it while the daughter was hiding in the closet (scary). She had no cell phone. They took a lot of stuff and the insurance covered it all. I took a bit of a run at this idea 2 years ago studying it for a few months at about 4 hours a day but not realizing shared kitchen or bath is outside the LTA. At that time I talked to my tax lady and she said you just pass the insurance cost on to the tenant(s). So in the end safety is the biggest concern and selecting the proper people is ultimately the driver of success no matter what way you slice it or dice it. Everyone I have ever talked to says this and to me it makes perfect sense. I have seen these types of ads and they pretty much always want a female. I figure safety is the main reason. I won't go ahead until I am confident I can select the tenant with sufficient skill (or have a professional do it for me if that is appropriate). I am guessing if I do try this it could take me 1 to 3 years at 4 hours a day before I feel comfortable. It is kind of hard to estimate from my vantage point however. Maybe someone could let me know if this is realistic


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## Just a Guy (Mar 27, 2012)

I know some experienced landlords who ran into some nice young people like this...

http://www.cbc.ca/news/canada/briti...-powerless-as-tenants-get-free-ride-1.1307443

As for being robbed being covered by insurance, ask the people how they were mentally after it happened...


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## OnlyMyOpinion (Sep 1, 2013)

LandlordToBe said:


> ... I won't go ahead until I am confident I can select the tenant with sufficient skill (or have a professional do it for me if that is appropriate). I am guessing if I do try this it could *take me 1 to 3 years at 4 hours a day* before I feel comfortable. It is kind of hard to estimate from my vantage point however. Maybe someone could let me know if this is realistic


Doing what for 4 hours a day over years?


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## LandlordToBe (Jul 12, 2016)

Thanks for the link. It is good to keep aware of these types of people. I actually had a girl friend when I was 27 for a few weeks and I found out her family was like this so I decided to disconnect for that very reason. 

When I was checking into renting about 2 years ago I was working on two projects (learning to rent thinking I had to worry about the LTA) and (developing a database driven website). I decided to stop the renting project and focus full time on the website. I got the website completed (took a full year full time) but in the end it failed so I closed it down. So I still have a set of MS-Word documents each of which is a todo list of things to do regarding renting (advertising, before you show the place, show the place, if they want it, evaluating the tenant, if I accept the tenant, lease signing, if it is all good, if there are problems, evicting them, tenant leaving checklist, routines daily, routines monthly, routines yearly). I just have to adjust it for the fact that shared kitchen renting is exempt from the LTA based upon my up coming learning. Yeah, so I am pretty thorough (way more than most). On the flip side I met a lady who did absolutely nothing. She literally has no lease. No agreement. Nothing. She is renting her basement to an old lady who pays perfectly. I warned her based upon my prior 2/3 months of study that she was very lucky and maybe she should not do that in the future. In my case I might have scared away a great tenant like that with my extreme thoroughness and caution. So these are both the extremes. I think my biggest fear is they are nice, they pay their rent, we become friends, they loose their job (not because of any fault of their own) and they can't pay.


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## LandlordToBe (Jul 12, 2016)

OnlyMyOpinion said:


> Doing what for 4 hours a day over years?


Actually I answered part of it in the prior post that I just submitted. It took me 2 or 3 months to develop the todo list I mentioned. I think 2 or 3 years is too high. 6 months to a year is probably more realistic.


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## Just a Guy (Mar 27, 2012)

There is a big difference between investing (or being a landlord) and gambling, yet many people can't tell a difference. Anyone can buy an "investment" and call themselves an "investor". I know beanie baby "investors", I know people who stand in line to be the first to buy the latest in electronics to quickly resell them who call themselves "investors". 

I also know very educated people who've spent years getting degrees who fail miserably at investing.

To me, an investor is something else. When they buy something, they are very likely to succeed, they cut the risk out of the equation as much as possible.

Even experienced investors make mistakes though, some can be very costly.

When buying stocks, the usual cost is financial which can be bad, but it's only money. When being a landlord however, especially when the tenant has access to you, potentially your family, and your stuff, the cost can be far higher...much more than any insurance could cover.

I've had my share of good tenants, don't get me wrong. Landlords rarely talk about the good tenants, because they don't make good stories. In fact, I believe in the 90/10/10 rule. 90% of tenants are good, with only 10% being bad...of that 10%, only 10% are REALLY BAD. 

Over the years, I've had my share of bad tenants, I've also had a share of good tenants who've turned bad for outside reasons. This despite my experience and screening methods. Of all the bad tenants, I can guarantee you, not one ever thought what they were doing, or did, was wrong. In fact most probably felt justified for some reason and probably boast about what they did to others. Go take a look at some of none's, a self proclaimed "excellent tenant" and board user, old posts when he moved out and proudly made his landlord's life a living hell. 

I could tell you many stories of people who did exactly what you are proposing without ever having a problem...heck, there are even ways to reduce the risk (overseas students, pre screened by their programs for example) but, as we've seen by many police reports, even screening doesn't catch everyone.

Personally, I don't live in fear and I give people many chances...in fact many of my good tenants have questionable backgrounds which made it difficult for them to get places, but that doesn't mean I invite them over for dinner. Being a landlord is running a business, you have to treat it like a business and keep emotions out of it. That also why I have a rule about not renting to friends or their family.

As I said, investors don't gamble. The odds of something happening my not be high, but when it comes to personal stuff, I wouldn't gamble at all... Even with odds as good as 90-10.


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## Mukhang pera (Feb 26, 2016)

Just a Guy said:


> I know some experienced landlords who ran into some nice young people like this...
> 
> http://www.cbc.ca/news/canada/briti...-powerless-as-tenants-get-free-ride-1.1307443
> 
> As for being robbed being covered by insurance, ask the people how they were mentally after it happened...


In cases like that in the story, one must be prepared to play by their rules of engagement. To adhere to the residential tenancy legislation goes something like this:
- serve a termination notice on the tenant(s)
- they will evade service, so you'll end up serving substitutionally, probably by posting
- await the day of "deemed service"
- wait for the last day for the tenant to file a dispute; it will then be filed
- wait for a notice of hearing
- show up at the hearing and be prepared for the tnt. to apply (and get) an adjournment; everyone gets one "free" adjournment
- wait for the next hearing and perhaps another adjournment
- the tribunal will eventually uphold the notice 
- the tnt won't leave voluntarily
- go back to the tribunal and apply for an order for possession
- wait for notice of hearing
- more adjournments 
- O/P granted; go file it with the court
- provide a wad of cash to the sheriff or bailiff to pay for a few guys and a truck to take possession
- wait patiently until the bailiff has time to act, which means they'll drive by once of twice first to ask the tnt. if he has plans to leave
- after many months and no rent, you get possession of your trashed premises.

I have never gone that route, but it's one with which I am well familiar.

Some time back I bought a 5-plex in East Vancouver (a couple blocks east of Fraser for you Vancouver types). I had not yet learned that buying on the east side of just about anywhere is unwise. I also had not yet learned that buying a rental property with sitting tenants is also unwise. So, of course, I inherited a problem tenant.

Before long, I received a call from my trusted assistants. I am sure that JAG and a few others here will confirm that owning rental property means you must have a stable of people with divers skills - accountants, lawyers, plumbers, property managers, builders and a few all-round helpful types. So, my guys call to report that my problem tenant was being particularly unruly, running naked through the halls, raising a ruckus, scaring other tenants. They ask if I would care to initiate formal proceedings to deal with the problem or whether I would prefer a more summary approach.

It was late in the day on Friday. Good. The Rentalsman's Office (as the RTB was then known) was about to close until Monday morning. The tnt. would get no speedy relief there. So I told the guys to go ahead, do what was necessary to effect eviction and regain possession. The deed was done within the hour. 

I knew there was no way I would hear of the matter again. The tenant had to move on. To oppose my self-help eviction, he would be the one required to bring an application to the tribunal and after a few months (and an adjournment or 2 at my behest) get a hearing at which he could argue that it's his right to act like a maniac and that his tenancy should be reinstated. Not likely.


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## LandlordToBe (Jul 12, 2016)

I read some of that article at this link. 
http://www.cbc.ca/news/canada/briti...-powerless-as-tenants-get-free-ride-1.1307443
Two years ago when I was thinking of doing this I remember thinking out how to check people out. I had already anticipated the mistakes she made. I would never trust a simple phone number. I think anyone who would actually trust a simple phone number as a reference is exactly what these professional tenant scammers are looking for. I designed my own application. They needed to give the the company, the company address and the name of the boss (as many companies they worked for as possible). I would also ask for payslips to match the companies checking to makes sure the photo id name matched the payslip and it matched the company. I would actually call or visit the company (using google to get the info and checking their phone number against the google info). A reputable company would be better. I would ask for the boss while I was at the company or over the phone. These are the types of checks I remember I was thinking of. There were a few other tricks I picked up from my many google searches on how to do this screening but I would have to reread my todo list. I would dump my "screen the tenant" to-do list in here but it is huge...lol. I think that is why I decided to create a website instead of renting. My own thoroughness scared me in that it would be a lot of work  My screening todo is 340 lines long...lol (well there are some blank lines in there to make it easy to read). Seriously I think my application would scare away a scammer. I would probably need to tone it done with experience. None the less my screening todo list has a lot of good ideas I picked up from many google searches. I believe this ladies problem comes back to what I said in my prior email. She simply did not do enough screening to increase the odds such that she was likely getting a good tenant. I am wondering if an insurance company would cover losses like her $20,000 loss (if this is possible no doubt the rate would go up once a claim was made since they would figure the landlord was not screening properly).


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