Renting out your home

Thinking of renting out your home, or another property you own, to get an income? Here are 4 optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition to consider:

  1. Rent out your whole home for part of the year.
  2. Rent out your basement or a room for all or part of year.
  3. Turn your home into a duplex and rent out 1 floor as an apartment.
  4. Rent out a family cottage or other vacation home for part of the year.

3 advantages of renting out your home

  1. Brings in cash – InvestInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition the rental income, buy an annuity to create monthly income or use it to cover expenses.
  2. Allows you to build equityEquity Two meanings: 1. The part of investment you have paid for in cash. Example: you may have equity in a home or a business. 2. Investments in the stock market. Example: equity mutual funds.+ read full definition Increase the amount you own in an assetAsset Something of value that a company or an individual owns or controls. Examples: buildings, equipment, property, a car, investments, or cash. Can also include patents, trademarks and other forms of intellectual property.+ read full definition that may go up in value.
  3. Provides a tax breakTax break A credit or deduction that lowers the tax you owe. Governments often offer tax breaks to help people save, go to school or pay costs such as child care.+ read full definition Deduct part of your mortgageMortgage A loan that you get to pay for a home or other property. Often the loan is for 20 years or more. You make a set number of payments for a set amount each year.+ read full definition, taxes and other expenses against the rent you get.

4 disadvantages of renting out your home

  1. May reduce enjoyment of your home – You have to shareShare A piece of ownership in a company. A share does not give you direct control over the company’s daily operations. But it does let you get a share of profits if the company pays dividends.+ read full definition it with tenants.
  2. You still have to pay property taxes and other costs – You are responsible for maintaining the property.
  3. May create landlord issues – You may have to do extra maintenance and deal with hassles from tenants. You are responsible for meeting legal requirements.
  4. Creates taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition costs – You may have to pay tax on income from rent and any unshelteredUnsheltered A regular investment or account that does not shelter your money from tax. In other words, you have to pay tax on your savings and the money you make investing them.+ read full definition investments you make with your rental income, and part of the capital gains when you sell the home if you deduct a portion of your mortgage as an expense.

Check with your municipal government before you rent out any property you own. There are rules you must follow.

Key point

Renting out your home:

  • brings in cash
  • keeps equity
  • provides tax breaks
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