For Rent By Owner In
Renting out your basement is not as simple as collecting the rent. There's a number of factors to consider before taking the role of a landlord including municipal bylaws, liability and taxes.
How To Rent Out A Basement
Your suite must be authorized for renting. An apartment which doesnít comply with municipal bylaws, building codes and safety regulations can't be legally rented.
When the municipality finds out that your second suite isn't authorized your tenants will have to be moved, and you'll be ordered to alter the home back into a single family dwelling or to adjust the apartment up to the standard.
You will be fined thousands of dollars, but consequences of renting out a non-compliant unit can be more severe. If the apartment caught fire causing injuries or death, you would be liable and could go to prison.
Existing Suite - Verify the status of a unit with the municipality. If it's authorized and certified for fire and electrical safety, you are free to rent it. Otherwise, request an inspection of the unit.
Depending on inspection results you may have to do some upgrades, or can apply for a variance which stands for the approval of an insignificant transgression. After the occupancy and property standards are met, your unit must pass fire and electrical safety inspections.
Keep in mind that secondary units described by homesellers as nanny or in-law apartments or 'requires a retrofit' are strong candidates for being unauthorized suites. They usually necessitate a makeover in order to be rented legally.
New Suite - If the municipality allows renting and your house pre-qualifies, you must apply for permits to go ahead with your project.
An experienced renovator will assist you to get them, coordinate the work of other tradesmen, and arrange final inspections. Once you have all necessary certificates concluing the project you are ready to look for tenants.
Homeowner Insurance - You must inform your insurance company that you intend to rent a suite in the house. If you don't reveal this information, you'll be risking having your coverage nullified.
Renting And Taxes
Rental income is a subject to tax. You have to report it when you file your income tax return. Expenses proportional to the rented footage can be written off. You can include the cost of maintenance and repairs, utilities, mortgage interest, property taxes and insurance.
These deductions will offset an increase in your income from renting, so your tax burden should not grow too much.
Principal residence tax exemption - If you rent a part of your property which was your principal residence for each year you owned it, you don't have to pay any tax on your profit realized from selling the property.
The rented portion is tax free as long as it is no more than 50% of your home, and you don't claim on it depreciation or capital expenses.
Avoid Rental Mistakes
Each province has own statute on apartment rentals. These laws define guidelines about deposits and rent increases. They mandate responsibilities of landlords and tenants, and set rules for resolving disputes and termination of tenancy.
Enclosed is the list of governmental websites where you can find legislation in your province and more information on renting. You can contact them directly for assistance.