Home rental law question


Alberta'sfinest
#1
If you start up a property managment company and buy a house, is it legal to rent that house to yourself as your primary home?
 
Dexter Sinister
#2
Quote: Originally Posted by Alberta'sfinest

If you start up a property managment company and buy a house, is it legal to rent that house to yourself as your primary home?

You'd have to consult a lawyer, which I'm not, to be sure, but I don't see why it wouldn't be legal, though there may be some hidden tax implications. Lots of people own and operate companies that own vehicles that are leased back to the principals of the company, I don't see why a house should be any different. On the other hand, property law is a strange and complex tangle of 800 years of custom, practice, precedent, and legislation, starting approximately with the Magna Carta of 1215. The revenuers likely won't view it as what they call an arm's length transaction, so it probably won't be like renting to or from strangers.

I'd counsel not making a move like that without advice from a good tax and property lawyer. The free advice you're likely to get here, including that paragraph above, might be worth exactly what you pay for it.
 
Curiosity
#3
Alberta's Finest

I have no advice but I was wondering if the house you wish to rent to yourself would become the official "headquarters" for your property management firm.

If so, wouldn't it be considered a business expense rather than a personal house?
 
TenPenny
#4
I expect it would be legal, but there are some implications: as a rental property, you'd lose the tax benefits of owning your primary residence.
 
Alberta'sfinest
#5
I was hoping to buy the house myself, but instead I think my dad is going to buy it for me, and rent it to me. He's going to rent it to me at a loss to his property managment company for like 5$ a month. Since the mortgage will obviousely be much more than the income from the property, he'll be able to right off the loss. So he'll be buying me a house with his income tax. I can't remember the exact percentage you can write off, but I think it was 90-95% of the loss. My dad will pay no taxes and I'll get a home which I'll later have signed over in my name once it's paid for. It appears that this is a very good tax loophole but I don't think you can do this to benefit yourself. He's going to consult his accountant to see if it can be done. My dad runs his own business, so he has a lot of money that he can write off.
 
Laika
#6
Is this in Alberta? If so, you can access a lot of information from the Alberta Government website.

Here is the link to the Residential Tenancy Act: http://www.qp.gov.ab.ca/documents/Acts/R17P1.cfm
 
TenPenny
#7
Quote: Originally Posted by Alberta'sfinest

I was hoping to buy the house myself, but instead I think my dad is going to buy it for me, and rent it to me. He's going to rent it to me at a loss to his property managment company for like 5$ a month. Since the mortgage will obviousely be much more than the income from the property, he'll be able to right off the loss. So he'll be buying me a house with his income tax. I can't remember the exact percentage you can write off, but I think it was 90-95% of the loss. My dad will pay no taxes and I'll get a home which I'll later have signed over in my name once it's paid for. It appears that this is a very good tax loophole but I don't think you can do this to benefit yourself. He's going to consult his accountant to see if it can be done. My dad runs his own business, so he has a lot of money that he can write off.

He'll have to do some creative accounting to write off the loss. If the tax people catch on that the rent is $5, they'll disallow the property's classification as an income property, since it isn't income. As well, since the benefactor is a non-arms length person, ie, a family member, they'll be even less forgiving. In order for business/investment costs to be used, there has to be a "reasonable expectation of profit", and renting a house out at next to nothing doesn't qualify.

Tread carefully, or the taxman will watch you like a hawk.
 
cortez
#8
Only if you have a split personality.
 
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