Rental income and tax benefits make it worthwhile to be a landlord: CIBC poll

The income and tax benefits from renting a property or space in a home are “worth the headache,” says a poll by CIBC.

The poll found that homeowners with a separate rental property earn on average $2,189 per month—50% more than their monthly costs. Those who rent out space in their home reduce their housing costs by as much as 70%.

The poll says that 15% of Canadian homeowners are already landlords while 11% plan on becoming landlords; among millennial homeowners, 30% are already landlords and 17% intend to be.

Read: Housing trends to consider for clients

Landlords say their main reasons for investing in real estate are:

• generating passive income now (22%);
• generating passive income for retirement (28%);
• investing for long-term appreciation (20%);
• future occupancy by themselves or their children (14%).

Along with the poll, CIBC published the report So, you wanna be a landlord: Tax considerations for rental properties by Jamie Golombek and Debbie Pearl-Weinberg. The report outlines tax considerations for homeowners who have rental income or are planning to earn it.

Seventy-four percent of landlords believe the benefits of tax deductions make owning an investment property a good investment even if it carries a negative cash flow. However, landlords may not be able to claim those deductions if expenses exceed income on a regular basis, said Golombek, managing director of tax and estate planning at CIBC Financial Planning and Advice, in a release.

The report points out that landlords who own a separate income property can deduct both capital expenses (e.g. renovations and real estate commissions) over time and current expenses (e.g. insurance and interest) immediately. Landlords who rent out part of their primary residence to a tenant can deduct only a portion of their expenses, related specifically to the rental area.

Sixty-nine percent of landlords said they would discount the rental rate for family and friends. However, doing this could limit their ability to deduct expenses or claim a loss from a tax perspective, said Golombek.

Read the full report here.

Also read:

Canadian home sales drop 14% in April: CREA

What to look for as clients renew mortgages

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.