Thinking about how to rent out your home instead of selling it? Smart move! Lots of homeowners are in the same boat, especially when the market’s a bit shaky. Maybe you’ve got too many memories to walk away, or you just see a great opportunity to make some money. 

Whatever the reason, renting can be a solid way to build wealth over time. This guide will walk you through how to rent out your house, from the legal stuff to finding the right tenant.

Is Renting Out Your House the Right Move?

Okay, so renting vs. selling, which way should we go?

  • Renting vs. Selling: Selling gives you a chunk of cash right now and frees you from all the landlord headaches. Renting brings in regular income, but you’re also responsible for being the landlord.
  • Current Market: Is it a buyers’ or sellers’ market out there? If you can’t get what you want for your place right now, renting can buy you some time until things improve. Plus, renting can sometimes make you more in the long run than selling, especially if property values are set to rise. Don’t forget, landlords can deduct things like mortgage interest, property taxes, and repairs from their rental income.
  • Personal Finances: Can you handle the bills if your place is empty for a month or two? You’ll need a bit of a financial cushion to make renting work.
  • Emotional Attachment: This one’s huge for some people. Renting lets you keep the place you love while still making money off it.

Just a heads-up. Renting isn’t always a walk in the park. You’ll need to budget for repairs, vacancies, and either the time you’ll spend managing it yourself or the cost of hiring someone to do it for you.

Let’s say you’ve decided to rent out your house. What should you consider?

  1. Understand the Legal Requirements

Think of it like this: when you become a landlord, you’re entering into a special agreement with someone to let them live in your property. Because it’s someone’s home, there are important rules to follow to make sure everyone is treated fairly and safely.

The biggest thing to remember in Canada is that each province and territory has its own set of rules. It’s not one big rulebook for the whole country. So, the first step is always to figure out the rules for your specific province (like Ontario, B.C., Alberta, etc.). Let’s break down the legal stuff and taxes for renting out your house in Canada

  1. The Main Rulebook (Provincial Laws): Every province has a law that tells landlords and tenants what they can and can’t do. It’s usually called something like the “Residential Tenancies Act.” This law is the boss – your lease agreement can’t go against it. So, if you try to put a rule in your lease that the provincial law forbids, that rule won’t count.
  2. The Written Agreement (Your Lease): You absolutely need a written contract, called a lease or tenancy agreement.
    • What goes in it? Think of it as a checklist:
      • Who’s living there (all adults should sign).
      • Your property’s exact address.
      • The duration of the renting, such as a year or a month-to-month arrangement. 
      • How much rent is, when it’s due, and how the tenant pays.
      • What’s included in the rent (like heat, electricity, water, parking, and appliances).
      • Rules about pets (be careful, some provinces have rules about “no-pet” clauses!).
      • When as the landlord, you have the authority to enter the property (typically 24 hours’ notice, unless there is an emergency).
      • How will someone proceed if they want to terminate the lease early? 
      • Any special disclosures you need to make (more on that below).
  3. Money Upfront (Security Deposits):
    • You can request a “security deposit” (sometimes known as a “damage deposit”) in the majority of provinces. This money is held in case the tenant damages the place or doesn’t pay their last month’s rent.
    • Limits: There’s usually a cap on how much you can ask for (often no more than one month’s rent).
    • Pets: Some provinces allow a separate “pet damage deposit,” but that’s also usually limited (like half a month’s rent).
    • Interest: A little amount of interest on the tenant’s deposit is required by law in certain regions.
    • Returning it: You have a strict deadline (often 10-15 days) to return the deposit after the tenant moves out, minus any money for actual damage beyond normal wear and tear, or unpaid rent.
  4. Raising the Rent:
    • The rent cannot just be increased whenever you want. Provinces have laws related to:
      • How often: It can typically only be raised once every 12 months.
      • Notice: You must provide the renter with a written warning period of at least ninety days.
      • Limits: Many provinces have “rent control” or “rent increase guidelines” that set a maximum percentage you can raise the rent each year. You generally can’t go over this unless you apply for a special exception.
  5. Keeping the Place Safe and Livable:
    • This is a big one. As the landlord, you’re responsible for making sure the home is safe and in good repair. This means:
      • The roof, walls, and floors are sound.
      • The heating, plumbing, and electrical systems work.
      • There’s hot and cold running water.
      • You’re responsible for dealing with pests like mice or bed bugs.
      • It meets all local building and safety codes (like having working smoke detectors).
    • When the tenant tells you something is broken, you need to fix it in a reasonable amount of time.
  6. Tenant Privacy:
    • Your tenant has a right to privacy. You can’t just walk in whenever you want.
    • You usually need to give them proper written notice (like 24 or 48 hours) before you enter, and you need a good reason (like to do repairs or show the place to a new renter).
    • The only time you can enter without notice is in a real emergency (like a fire or flood).
  7. No Discrimination (Human Rights):
    • You can’t refuse to rent to someone, or treat them differently, because of things like their race, religion, gender, disability, family status (e.g., having kids), sexual orientation, or where their income comes from. This is covered by federal and provincial human rights laws.
    • You also have to make “reasonable accommodations” for people with disabilities (like allowing a service animal, even if you have a “no pet” policy).
  8. Eviction Rules:
    • You can’t just tell a tenant to leave. If you need a tenant to move out, there are very strict legal steps you must follow.
    • You usually have to give them a specific written notice using special forms.
    • For most evictions (even for not paying rent), you’ll likely need to go to your provincial Landlord and Tenant Board (or similar body) to get an official order before you can legally remove them.

Before you rent, always:

  • Look up your province’s Residential Tenancies Act. A quick Google search for “[Your Province] Residential Tenancies Act” will get you there. Most provincial government websites have plain-language guides.
  • Consider a lawyer: For your first time, or if you have any doubts, talk to a lawyer who specializes in landlord-tenant law in your area.
  • Check local bylaws: Your city or town might have additional rules, like needing a license to rent out your property, or special rules for basement apartments.
  1. Taxes When Renting Out Your House in Canada

Okay, so the government wants their slice of the pie when you make money from renting. This is where the Canada Revenue Agency (CRA) comes in.

The good news is, you don’t pay tax on all the rent money you collect. You only pay tax on your net rental income – that’s your rent money minus all your allowable expenses.

Key Deductible Expenses:

  • Mortgage Interest.
  • Property Taxes
  • Insurance Premiums
  • Utilities
  • Repairs & Maintenance
  • Advertising
  • Property Management Fees.
  • Legal & Accounting Fees

Capital Expenses vs. Current Expenses:

  • Current Expenses: These are your day-to-day costs to maintain the property (like a small repair). You deduct them fully in the year you incur them.
  • Capital Expenses: These are larger costs that improve the property or extend its life (like adding a new addition, replacing the entire furnace, or a major kitchen renovation). You can’t deduct these all at once. Instead, you “depreciate” them over several years using something called “Capital Cost Allowance” (CCA). This is a fancy way of saying you get to claim a portion of that cost each year. A word of caution: If you claim CCA on your main home (even just the rented portion), it can affect your ability to claim the “Principal Residence Exemption” when you eventually sell the entire house, which could mean you pay more capital gains tax. Many landlords choose not to claim CCA on their home to preserve this exemption. Always discuss this with an accountant.

Calculating Your Taxable Income:

  • You’ll track all the rent you collect and all your eligible expenses throughout the year.
  • At tax time, you’ll fill out a special form called Form T776, Statement of Real Estate Rentals.
  • You can determine your net rental revenue (or loss) with the aid of this form. 
  • This net amount is then added to your other income on your personal tax return (T1).
  • You pay tax on this combined income at your regular personal income tax rates.

Important Notes:

  • Big improvements (like a new roof) are “capital expenses” and are deducted over time (CCA), which can affect your tax-free “Principal Residence Exemption” when you sell.
  • When you sell, 50% of any profit (capital gain) is taxable.
  • Keep all your receipts.
  • Seriously, consult an accountant – they’ll save you headaches and likely money.
  1. Get Your Property Ready for Rent

First impressions matter big time. Your goal is to find a reliable tenant who will treat your place with respect. A little preperation now means happier tenants and lower costs down the road.

  • Repairs: Fix everything that’s broken, no matter how small. Leaky faucets, busted appliances, structural issues – get it all sorted. DIY if you’re handy, otherwise call in the professionals.
  • Cleaning: Get your place sparkling clean. 
  • Safety Checks: Verify that your carbon monoxide and smoke detectors are operational. For added peace of mind, you might even want to consider installing a security system. 
  • Staging for Rental: Make it look inviting! A fresh coat of paint and updated light fixtures can make a huge difference.
  • Cost-Effective Upgrades: Focus on the things that will give you the most bang for your buck. A new kitchen backsplash, updated bathroom mirrors, or new door handles can make a place feel much more modern.
  1. Determine the Right Rent Price

You want to find that sweet spot: high enough to maximize your income, but not so high that you scare away potential tenants.

  • Research Comparable Properties: See what other, similar properties are renting for on sites like Kijiji or Rentals.ca. 
  • Rent Estimate Tools: Try using some online rent estimation tools. 
  • Real Estate Agents: Talk to local real estate agents. They know the market and can give you some good advice on pricing.
  1. Market Your Rental Effectively

The better you market it, the faster you’ll find a tenant:

  • Internet Listings: Place your ad on well-known rental websites.
  • Photos: Exceptional images are essential! Really, spend money on quality images.
  • Social Media: Post links to your listing on various social media platforms.
  • Open Houses: Hold open houses so people can see the place in person.
  • Highlight Key Features: Don’t forget to showcase the best features of your property and the advantages of the location.
  1. Screen Tenants Carefully

This is one of the most important steps. You want to find someone who will pay rent on time and take care of your property.

  • Background Checks: Run background checks to see if the applicant has a criminal record or has been evicted before.
  • Employment Verification: Verify that the applicant is employed and has a stable income.
  • References: Call previous landlords to get their opinion of the applicant.
  • Credit Checks: Check their credit history for any red flags.
  1. Decide Whether to Hire a Property Manager

Being a landlord takes time and effort. Is it worth hiring someone to do it for you?

  • DIY vs. Professional: Doing it yourself saves money, but it takes a lot of time and dedication. A property manager will handle everything, from screening tenants to collecting rent and handling maintenance.
  • Choosing a Property Manager: If you go this route, find a reputable company with local expertise. Get references and read online reviews.
  • Factors to Consider: Property managers generally charge between 8% and 12% of the monthly rent.
  1. Prepare for Ongoing Responsibilities

Being a landlord isn’t just a one-time thing. It’s an ongoing commitment.

  • Maintenance: Be ready to deal with maintenance requests. Regular inspections (put it in the rental agreement, so it is known when doing that) can help prevent bigger problems down the road.
  • Rent Collection: Set up an easy and reliable way to collect rent. Online payment systems are great for this.
  • Handling Tenant Issues: Be prepared to deal with complaints and settle disputes quickly and professionally.
  • Being a Landlord Day-to-Day: Expect to spend time answering emails, inspecting the property, and dealing with emergencies.

Key Takeaways

Just remember these key points:

  • Make sure you’re financially and emotionally ready.
  • Follow all the legal rules.
  • Prepare your property for tenants.
  • Screen tenants thoroughly.
  • Think about hiring a property manager to take some of the load off.
  • Be prepared for the ongoing responsibilities of being a landlord.

Thinking about all of this makes the decisions involved easier, and will turn you into a successful landlord. For expert financial advice specific to renting out your home, get in touch with the team at Mortgage Alliance.