Income property is worth the investment

Being a landlord is not for everyone, but according to a new CIBC poll of Canadian homeowners, those who are landlords can benefit financially. Respondents who own a separate rental property say they earn on average $2,189 per month – 50 per cent more than their monthly costs. Further, those who earn income by renting out space in their home say they reduce their housing costs by as much as 70 per cent.

The online surveys, conducted in two parts, questioned randomly chosen Canadian adults as well as Canadian adults who own at least one property and use at least a portion of it for rental income.

Concerns

The survey finds that the majority (80 per cent) of homeowners agree that renting out space in their home makes financial sense but value their time and privacy too much to pursue it. Further, 30 per cent of landlords say their top concern is dealing with unexpected costs for maintenance and repairs.

Worth the headache

Despite this, more than half of landlords (52 per cent) believe it’s “worth the headache.” Of those who own a separate rental property, half say their top reason to invest is to generate passive income now (22 per cent) or in retirement (28 per cent). Another 20 per cent have invested for long-term property appreciation, and only 14 per cent cite future occupancy by themselves or their children as their main reason to invest.

“High housing costs and the growing appetite for additional revenue streams make renting out space a popular choice, especially among younger Canadians,” says Jamie Golombek, managing director, Tax and Estate Planning, CIBC Financial Planning and Advice. “While most homeowners believe the tax benefits alone make an income property a worthwhile investment, it’s critical to understand how it fits into your overall financial plan and be mindful of all of the tax implications of going this route so you can make the most of the venture.”

5 tips for potential landlords

1. Be clear about your income expectations – you’ll have to pay tax on rental income, and expect to spend one to two months of rental income on property maintenance and repairs.
2. Invest in the location and quality of your space to attract quality tenants.
3. Understand your legal obligations as a landlord as well as zoning and insurance issues for renting out your space.
4. Be prepared to spend time and energy addressing tenant concerns promptly.
5. Stay organized and keep records of all rental expenses.

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