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Have You Considered Buying Your First Property with a Rental Suite?


If you’re in the market to buy your first home, you may want to also look into benefiting from some added income through the purchase of an owner-occupied rental property. After all, there are nearly 4.5 million people who live in rental housing across the country – approximately one third of total households.


While this type of purchase must be used as your primary residence, it allows you to benefit simultaneously from being both homeowner and landlord. It also offers a relatively low-risk way to dabble in real estate investing, and a practical way to benefit from rental income.


With interest rates sitting at record lows and not expected to rise anytime soon, building wealth through real estate may be a great match for you while entering the property ladder.


5 things to consider when renting part of your home

1.      Affordability. Since you’ll be living in the same house as your renters, you may want to consider a larger home, or one that’s already set up to accommodate tenants, which will likely be more expensive. Your rental income may offset your costs, but you also need to be aware of expenses associated with being a landlord and have a plan for any shortfalls during gaps between tenants. Researching the average rent for your desired neighbourhood will help determine whether this type of purchase is financially feasible in your area.

2.      Financing. Your lender requires information about you and any home you plan to buy during the mortgage pre-approval process. But, with an owner-occupied rental property, they’ll also want details about your potential rental income. Getting pre-approved for a mortgage means you can make an offer on a property with the confidence that you’ll be able to access the money you need to complete the purchase. Obtaining financing for a rental property may seem daunting, particularly if you’re a first-time buyer. There are some distinct nuances you need to understand when renting out part of your property. For instance, you may plan on using rental income towards your mortgage or to cover landlord-related costs. Lenders will, however, want to mitigate risk by ensuring you can cover costs and expenses without the rental income in case you encounter a period of vacancy.

3.      Property. Searching for any type of home takes time, research and patience, but finding the right owner-occupied rental property requires even more effort. It’s important to understand that you’ll be giving up a certain degree of privacy and freedom, so you’ll need to decide what type of home to buy. Will you be better off in a single-family home, duplex or even a triplex? As a general rule, single-family homes attract longer-term renters, and liveability aspects and nearby amenities are key. Size and location are equally important. It’s wise to connect with a local Realtor who can investigate the desired neighbourhood thoroughly and assess whether the area has a high vacancy rate.

4.      Business. Treat your rental property like a business by remaining professional with your tenants and abide by provincial rental property rules. Ensure that the rental property is a safe place to live, everything meets current codes and utilities are in good working order. Set clear boundaries between you and your tenants. You’ll want to be friendly, but avoid fostering too close of a relationship or business-based decisions could get awkward. Maintain separate accounting books and records from your personal residence, which will not only prove convenient for tax purposes but will also help you understand the financial aspects associated with a rental.

5.      Tenants. Be sure to screen for the right tenants. Generally speaking, families or professional couples are seen as better prospects based on perceived financial stability. For many people, living in an owner-occupied property will instil a desire to take better care of their unit. On the flip side, however, living in the same building with their landlord could make some tenants uncomfortable, so make sure this information is disclosed upfront. Check both credit and references to help determine whether your potential tenants are responsible. Finally, have a written rental or tenancy agreement in place so all parties are aware of their rights and obligations.


Have questions about buying an owner-occupied rental property? Answers are a call or email away.


Candice Joy

Mortgage Agent -TMG 

FSRA 10315

Owner Mills Financial Group

613 558 1143