Primary Residence - Sharing House with Roommates

[btang693]

Hey Guys,

I am interested in your opinions and advice/tips for my current situation. You can inform me of claimable taxes or just share your similar experiences with me!

So, i just bought a place in downtown ottawa 5 mins beside Ottawa Univ. It`s 4 bedrooms and I will be renting out 3 rooms at roughly $600 each. The house itself costs about $2800 to run, this includes, mortgage, condo fee, utilities, cable, property tax and whatnot. After netting the income, I still have to pay about $1000 out of my own pocket to live. I was wondering if this was a good financial move, either way, it`s too late to do otherwise now, i have grad students as tenants already having signed the lease agreements and I close on the house in about 2 weeks. I felt it was a nice investment given its prime location from downtown and ottawa U. So my rationale is that instead of having a cheaper house at the end of my amortization period, that I would have a nicer more valuable house given the same circumstances.

Any advice/tips on things that I can claim would be helpful. I believe I fall under the category of the innkeeper`s act, thus voiding the tenancy act agreement.

Awesome forum btw, keeps me busy inbetween classes!!

-BT

 

[derekcw]

Hi BT.

I`ve have been in a similar situation where I was renting out 2/3 of my bedrooms in my primary residence. It was a great way to increase my personal cashflow right out of school. What you want to avoid, if you expect to have capital gains in the future, is losing your capital gains exemption on your primary residence. This usually be avoided if you can prove to Revenue Canada that you treated the property like a home, and not a business. The rule of thumb is you should report all of your income and do not expense more than 50% of the expenses of your property against that income when you report your rental income on your taxes. I always stuck to 45% so that I was never in the grey area. This then allows you to have the best of both worlds, being able to pay for 45% of the expenses of the property with pre tax dollars and not having to pay capital gains taxes when you sell. I hope that this helps.

Derek Wong
DCW Properties Group Ltd.

 

[btang693]

Thanks Derek,
I did not consider that aspect at all, I was thinking of claiming all that I was entitled to - 75%, but your point makes good sense. Did you use an accountant to take care of your taxes or did you just go ahead and do it yourself? Thanks

-bt

 

[derekcw]

QUOTE (btang693 @ Aug 7 2008, 08:19 AM) Thanks Derek,
I did not consider that aspect at all, I was thinking of claiming all that I was entitled to - 75%, but your point makes good sense. Did you use an accountant to take care of your taxes or did you just go ahead and do it yourself? Thanks

-bt


I did my own taxes when I was doing the above . Naturally I had run the above by my accountant and CCRA beforehand.

Derek

 

[TommyK]

QUOTE (derekcw @ Aug 13 2008, 08:37 PM) I did my own taxes when I was doing the above . Naturally I had run the above by my accountant and CCRA beforehand.

Derek

Thank you Derek for this valuable piece of information. I am thinking of doing shared accomodation as well so I will keep in mind the expenses I can use as write-off.

Thanks!