Renting a property to tenants can help increase a South Calgary household's cash flow and keep the home from sitting vacant. This step requires a lot of forethought, however, as there are many important things to consider. From insurance to taxes, and everything in between, keeping the top considerations in mind can help homeowners avoid common pitfalls and achieve great results. Here's a look at the most important things to know when renting a Canadian property to tenants.
Insurance Companies May Require a Change in Policy
Before renting out a property, Canadian homeowners must first check with their insurance company to ask about the need for policy changes. The rules differ from company to company, but some require a change in coverage when tenants are involved. If the coverage does not accommodate tenants, future claims could be denied as a result.
Even when set up correctly, the homeowners insurance policy does not cover tenants' furniture or other belongings. So, they need to let them know to set up their own renters insurance policy as well.
Market Research Helps in Setting Competitive Rates and Terms
In order to attract excellent tenants, homeowners must set fair and competitive rates and terms. They need to set a fair monthly rent amount plus look at their deposit requirements, pet fees, and other charges issued to their tenants. They also need to consider how well their terms align with others in their industry.
To zero in on the ideal rate and terms, homeowners can perform market research by looking at the other rentals in their area. They will need to review and record data about local rental rates and terms to create a clear picture of the market. Using that information, they can find the sweet spot and set the terms that help attract and retain exceptional tenants.
A Lawyer Can Create a Protective Lease and Help with Evictions
The lease agreement protects both the landlord and their tenants, so it is a must when renting a property. General lease documents can be found online, but they are not detailed enough to provide the proper protections. Instead, homeowners should work with a lawyer to create a protective lease. Establishing this working relationship early on will also provide access to support with any necessary evictions.
Background Screening Helps Find Ideal Tenants
Another way homeowners can protect themselves is by completing a background screening on all prospective tenants during the application process. Professional background screening companies can take an in-depth look at each applicant's financial standing, criminal history, and more. The info revealed by the background check allows homeowners to make an educated decision on which tenants will be most likely to pay rent on time and properly care for the rental.
A Maintenance and Repair Fund is More Important Than Ever
Homeowners need to promptly respond to all repair requests sent by their tenants or risk being out of compliance with local regulations. It is equally important for them to complete all routine maintenance and inspections on a regular schedule.
For those reasons, homeowners need to create a healthy maintenance and repair fund. And continue adding to it to handle even the biggest repair expenses as needed to keep their property in good condition.
Homeowners Need to Pay Taxes on Rental Income
In Canada, homeowners have to pay taxes on all the rental income they collect through the year. They are allowed to deduct their expenses, however, reflecting their profit or loss for the year. Common deductions include:
- Uncollected rent
- Maintenance, repairs, and upgrades
- Legal fees
- Property taxes
- Mortgage interest
Homeowners need to keep detailed records on all their income and expenses coming in from their rentals. Then, they can accurately report their profits and losses on their annual tax forms.
When homeowners keep all the right considerations in mind, they can achieve their goals in putting their rental on the market and retaining excellent tenants. Through their efforts, they can better achieve great success with all their rental market endeavors in Canada.