How to Prepare for Having a Tenant in Your Home

How to Prepare for Having a Tenant in Your Home

As a homeowner, it can be financially advantageous to rent out a room or a section of your residence, like the basement.

 

But being a landlord isn’t for everyone. Read on to learn more on this topic and to make the best decision for you.

How to Set a Price?

Rent is based on the residence’s location and the rental’s number of rooms. Is the space large enough for several people to share it as roommates? Are there a lot of students in your area? Is it close to services? Will you be renting it fully furnished, partially furnished or not at all furnished? All these factors should be considered when determining the price. You should also be honest with yourself about the rental’s overall condition: is it really up to date? If you want to rent it at the top rate, the space must be pristine, namely freshly painted with a clean bathroom and functioning kitchen. If you have carried out renovations in recent years, you should be able to ask for a higher price. A good tip is to research the current state of the market and talk to other landlords.

Do You Have to Declare Rental Income?

Tax rules vary depending on how you use a house. If you rent a room in your basement to a student, your residence will now be considered an income property and therefore taxable. This could result in a capital gain if your property’s market value now exceeds what you initially paid for it. But the good news is that if it is the family home and principal residence, the gain may be tax exempt.

However, if you rent out your entire home or principal residence, you may be exempt from paying taxes for a maximum of four years after having lived there. This is a particularly attractive option if you need to move to the other side of the globe for a while for work. Nevertheless, this is only possible if you don’t claim the depreciation cost as this is normally deducted from the rental income. 

What Insurance Coverage Do You Need?

Did you know that you must modify your insurance coverage if you decide to rent out a portion of your property to a third party or if you are simply to longer an owner occupant? If you don’t notify your insurance company of these changes, it may not pay for potential damage to your home.

It is also common practice to request that the tenant have their own insurance to protect their personal property in case of theft or loss. You can include a clause stating this as a condition when you sign a lease; however, you cannot legally demand it of an existing tenant. 

Additional Points to Know

If you have rented your entire residence to a tenant, be aware that you can’t just come in whenever you want, unless you have serious reasons for doing so. While the tenant has many rights and protections as an occupant, you can still establish certain rules regarding how they use the property. Of course, this all must be made clear before the lease is signed. Can they use the backyard? Is a parking space provided? Must all noise cease after 11 p.m.?

Be sure to set the record straight at the outset, so there is no misunderstanding! Ideally, in writing, in the lease. 

Are You the Landlord Type?

Besides the financial incentive to having a tenant in your property, you should ask yourself if you’re cut out to be a landlord. The person may turn out to be noisy, pay the rent late, have strange guests, not respect your privacy and not be as clean as you would wish. In short, a tenant can exhibit all kinds of behaviours that might annoy a landlord, especially if both are sharing the residence. Consider carefully if you are ready for this!

One final piece of advice: conduct a credit check before you take on any tenant. Moreover, try to find a tenant that can provide a recommendation from a former landlord or rent to a family member. 

RE/MAX Québec

By RE/MAX Québec

By RE/MAX Québec

A leader in the real estate industry since 1982, the RE/MAX network brings together the most efficient brokers.