Is renting out the condo wise?
Currently, my wife and I own a condo that we bought five years ago. Wewould like to move into a house and rent the condo. Is this a good ideaand are there any tax consequences?
Q - Currently, my wife and I own a condo that we bought five years ago. We would like to move into a house and rent the condo. Is this a good idea and are there any tax consequences?
A - Investing in real estate has made many individuals wealthy. The Canadian real estate markets have experienced phenomenal growth the past years but are currently declining in both price and sales. First-time buyers should not try to predict the market but buy when they can comfortably afford to do so.
Investors should do some research into being a landlord and the tax consequences.
As the condo would be your principal residence at the time you purchase your house, there will no taxes to give to CRA. However, the condo’s fair market value would be considered the cost of the condo for calculating capital gains tax on disposition.
Consider some of these issues before investing:
• Talk to your banker about qualifying for financing.
• Are you prepared to be a landlord?
• Can you carry condo expenses for several months if property is vacant or has a bad tenant?
• When and how do you report rental income?
• What must be done when you purchase or sell?
• What are the tax consequences of real estate?
• Is there a difference between commercial or residential property?
• How should you take ownership and how long do you intend to hold investment?
Consult a good real estate lawyer and tax adviser.