There may come a time when you have to make the tough decision of renting versus owning a property. For instance, if you need to downsize because your kids have left or you feel like your current space is being underutilized, it can be tough to decide whether to rent or own another property. We’ll help you figure out which move is the most strategic for you. There are several financial and emotional factors that are important to consider prior to making this decision.
Is Renting a Cheaper Option?
There are cases where renting a home is significantly cheaper than owning one. For instance, if you buy a condo, expect to pay regular monthly expenses such as maintenance and utilities, property taxes, insurance premiums and more. This can amount to thousands of dollars which could even be more than the monthly rent payments.
Are You Looking For Long-term Investment?
Owning a property is more of a long-term investment. When you take the route to buy a home, do not expect to start enjoying the fruits of your hard work instantly in terms of making investment income immediately after. Homes often appreciate over the years so the value of the property may even be twice as much in the next 10 years or so.
What Tax Deductions Can You Claim as a Landlord?
Did you know that you can claim tax deductions against your rental property? This is one of the main advantages of being a landlord. By claiming certain expenses, you can reduce your taxes payable and save a lot of money in the process. For instance, if you spend money advertising the home for sale or on other expenses such as insurance, maintenance, and repairs, they can be deducted from your tax bill depending on the percentage of your home that is rented out. However, in Canada, you cannot deduct mortgage interest that is paid on your principal residence when filing taxes. However, if you rent out your home there is an exception to this rule and you can claim a portion of the interest as a tax deduction.
What Happens When You Sell Your Home?
The CRA allows you to name one of the properties you own as a principal residence for each tax year. If you rent a section of your home, you can still name it as your primary residence so long as you live there for sometime during the year. You can name different homes to be your primary residence each year for tax purposes. However, expect to pay capital gains if you choose to sell the property for the period of time where it wasn’t your primary residence. Make sure you keep good records of the rent you receive, any expenses incurred among other details.At the end of the day, there’s a lot to consider when choosing whether to buy or rent a property. Selling your home and investing the proceeds is often a good option if you’re looking for immediate investment gains.