Investing in an income property is a great solution to help you pave your way to a mortgage free home. What’s better than making money on a rental while having your mortgage paid off? Whether you are thinking about renting a new or resale unit, below are a few things you should know before diving into the condo rental game.
As a landlord, there are corporation guidelines you and your tenants must follow. For instance, when you find a tenant, you must notify your condo corporation in writing within 20 days of the tenancy starting. You should let the corporation know: your intentions on renting out the unit, your current residing address, amount of rent you will be charging and your tenants’ full legal name/s. The same rule applies when you decide to stop renting out your unit. Again, you will need to inform your condominium corporation within 20 days of the tenancy ending.
In most cases, leases are for a 12-month period and after that are considered to be on a ‘month-to-month’ basis. This means that they don’t need to renew their lease but are required to give 60 days notice prior to moving out. Tenants also have many rights in Ontario, with one of them concerning pets. Although you can refuse to rent to someone who owns a pet, you can’t evict an existing tenant for having a pet. Of course, these are just a few of the many guidelines you and your tenants will need to follow.
Renting out your unit and learning all these rules can be a severe headache, but using a real estate professional can often help with the process. Realtors know the in’s and out’s of leases and can lead you through rental guidelines. Although most realtors charge 1 month’s rent for commission, they will assist you in drafting up legal documents, posting your listing on MLS and help you determine a realistic rental price for today’s market. They screen potential tenants and do all of the grunt work like obtaining credit checks, employment letters and references too. CondoNow has an extensive list of qualified and experienced agents, located all over the city.
It is important to note that renting out a resale unit compared to a unit in a brand new building is very different. One thing you should be aware of is the HST rebate. In 2010, the HST rebate was introduced with the purpose of discounting a percentage of the HST for first time homebuyers. This being said, every new condominium sold in Toronto has an HST rebate built into it.
With the HST rebate, there are 2 scenarios that can occur.
1) The buyer as the ‘end user’
The first scenario is that the buyer purchased the condo with the intention of it being their primary residence. This means that the buyer will be the ‘end-user’ and they are buying it to live in rather than renting it out. If this is the case, the buyer will qualify for the rebate and upon closing the builder will collect it on their behalf.
Finally! You received your rebate and now you can rest easy. Wrong! Even after you receive your HST rebate, you still need to abide by ongoing conditions in order for you to avoid having to pay back the amount PLUS interest. If you decide to sell the property or rent it out within a year of occupancy, the rebate must be repaid. It is only after a year of occupancy that there will be no further repercussions made in regards to the rebate.
This leads us to the second scenario where a buyer or investor is planning to use the unit as a rental property. In this case, the buyer will have to pay the HST prior to closing which will significantly increase the price of the unit. This being said, it may be a better option to wait a year into your occupancy.
There are a lot of rules and regulations to think about when renting out a unit in a condominium and even more to consider when renting out a pre-construction unit. Readers must be aware that these are only some of the many restrictions condominium corporations have for rentals. The intent of this article is not to be read as a form of legal or tax advice, but to be read as an informative piece. Renting out your unit can earn you big bucks and have many benefits but it is always important to consult a Real Estate Lawyer to avoid any legal complications.