Renting Out Your U.S. Home Can Help You Pay It Off
Have you thought about how renting out your vacation home when you’re not using it could help offset the costs of owning it, especially if it’s in a sunny vacation spot like Florida, California or Hawaii?
By renting out your home on a short- or long-term basis, you may be able to:
- Pay down your U.S. mortgage faster
- Cover taxes, insurance, fees and more
- Enjoy an income stream in U.S. dollars
Willing to give up your vacation home for a month or two in the winter?
You may be able to charge premium rates as January-March is typically a peak period.
What to Consider Before Renting Out Your Place
You bought a U.S. home to enjoy it. But if you’re not able to live there full-time, renting it out can help you earn some extra cash you can use for things like paying your mortgage or covering taxes and fees. One great thing to keep in mind — your rental income will be in U.S. dollars.Renting your place out may not be ideal if you spend your entire winter in the U.S. However, if you’re a part-time snowbird or invested in a property you don’t plan to live in year-round, renting may be the perfect solution to offset some of your costs and put more money in your pocket. If your property is part of a condominium or club — or your neighbourhood has homeowner’s association rules or by-laws, you will also need to check for any restrictions on renting.
There are a few key factors in knowing how much to charge for rent. The big ones are the time of year you’ll be renting out your home, it’s location and the length of the rental.
Renting out your property during the winter months is usually when you’ll earn the most income. November, December and April also have some demand. Summer is when you’ll likely earn the least for your property. But there are a few exceptions, like parts of Florida, which have a high-demand market all year long.
Short-term rentals (for a few months) may be ideal if you only plan to stay in your home for certain parts of the year but want to make use of it when you’re gone. Long-term rentals are ideal if you’re a few years away from retirement and want to pay down your mortgage while you’re still working.
Anytime you earn money in the U.S., you’re most likely going to be taxed. You may be able to deduct some of the home’s operating costs (including property taxes, repairs, etc.) from your gross rental income, meaning you’ll only be taxed for how much you actually profited.
If you’re renting out your U.S. home for the first time, it’s best to talk to a cross-border financial planner or tax expert who can help you make the most tax-efficient decisions for your unique situation. Plus, they can help you better understand which tax laws apply to rental income, both in the U.S. and Canada.
Getting Ready to Rent Out: 3 Things to Do
If you plan on renting out your U.S. home, let your insurance company know so they can make sure you have the proper coverage. Liability insurance is essential, but your insurer may suggest other options as well.
Overseeing your U.S. home while you’re in Canada can be tough, so many Canadians choose to hire a property manager to manage the details. Property managers can help screen potential renters, handle any issues that come up and inspect your property in between tenants to make sure everything is in tip-top shape.
When selecting a property manager, consider whether you’d like an individual or a company to oversee your property, compare fees, and find out what type of licensing or certification they have. Beyond that, it’s also helpful to know their communication policy and how they handle unexpected issues to ensure you’re both on the same page.
If you’ve decided to rent, here are a few things you can do to get your home ready for tenants:
- Get the proper insurance
- Lock up any valuables
- Get signed rental agreements from your tenants and consider asking for an upfront security deposit
- Hire a property manager to oversee your property while you’re away
- Set up a system to keep track of operating costs for tax-purposes
- Clean up your home so renters have a tidy place to stay
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