Renting your vacation home or cottage is a great way to offset some of the costs, such as mortgage and property taxes. However, before you decide to rent your property you need to do a bit of research on the implications.
First, there’s wear and tear on your cottage. Do you want to share your personal space, and personal items with strangers?
Second, how does it affect your insurance? In some cases insurance companies will not insure you if you are renting your property…or, they will charge you a much higher premium. In any case, make sure you have the proper insurance, especially for third party liability. The last thing you want is for someone to hurt themselves on your property and sue you.
Thirdly, is your property in rentable condition? Have you taken all precautions to protect your personal items? Have you removed all hazardous goods? Does your home or cottage and property meet standard safety codes (this will be very important if there is ever an insurance liability claim—don’t get caught short).
Fourth, do you fully understand HST implications? Will the sale of your property in the future be subject to HST? This is a tricky one because HST rules are so convoluted. A general rule, but you should always check with an accountant, is that you need to personally use the property equal to or greater than the amount that you rent it out. If you go through a rental agency, you will have to charge HST, but in order to avoid being subject to HST when you sell, you can not claim any Input Tax Credit.
Here’s the link to the HST guide as it pertains to Vacation Property: http://www.cra-arc.gc.ca/E/pub/gi/gi-025/gi-025-e.pdf Good luck! Once you read this you will probably realize the importance of reviewing with your accountant.
Fifth, do you plan to rent it out yourself or go through a rental agency? Rental agencies charge high commissions (much higher than Real Estate agents, I might add), but can get you a higher weekly rate. Be sure you know what services they provide. Most expect you to arrange for a cleaner between rentals and to have a handy-man available for any issues that may crop up during any rental period.
Lastly, (probably not the last thing to think about, but the last I’ll put down in this Blog)…How will renting out your vacation home or cottage affect the sale of your property when you decide to sell? Generally, as a Real Estate agent, we are only allowed to show rental properties between renters…which is usually only a window of about 4 hours on a Saturday or Sunday. This is very restrictive and difficult to work around when we have an interested party.
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. Kathy Dimaline is a Real Estate Broker for RE/MAX Grey Bruce Realty Inc. The comments on this Blog are the opinions, only, of Kathy Dimaline and do not constitute any legal advice or legal opinion and does not represent the interests or opinions of RE/MAX Grey Bruce Realty Inc., brokerage.
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