PASSIVE INCOME via RENTAL PROPERTIES in Ontario's Niagara Region

What Does Passive Income Mean?  Per Wikipedia’s definition, “Passive Income is an income received on a regular basis, with little effort required to maintain it.[1] The definition per Investopedia is “Earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not actively involved.” 

Revenue Canada does not refer to it as Passive Income.  Income from property is generally regarded as the return on invested capital when little or no time, labour or attention is expended in producing the return.[2]  Though income from property could include dividends, interest, and royalties, this article focuses on income from rented properties.   

There are many reasons why you may be reading this article.  With the current economic downturn, perhaps you are looking at ways to recoup your investment loss from the stock market.  Or, rental income may be the only way to get ahead because you’re already working full time.  Or maybe you need to share your property because you cannot afford the mortgage alone and rental income can supplement your cash flow.   

The Niagara Region is full of opportunities to earn rental income.  Diane VanKleef Walker, with over 30 years experience in the rental industry, reports you could buy a completely rented property like www.39manley.comand immediately receive well over $1,000 per month after expenses. 

As per Revenue Canada, generally, you can deduct any reasonable expenses you incur to earn rental income. The two basic types of expenses are:

  • ·                         current expenses; and
  • ·                         capital expenses.                   

Current or operating expenses are recurring expenses that provide a short-term benefit.  For example, a current expense is the cost of repairs you make to keep a rental property in the same condition as it was when you acquired it.   

The following types of expenditures will usually be deductible from rental revenue in the year they are incurred; property taxes, insurance, maintenance, utilities, advertising, interest on money borrowed to purchase or improve the rental property, accounting expenses, legal expenses, landscaping, certain automobile expenses, office supplies, commissions, and wages to superintendents or maintenance people[3].   

Capital expenses provide a benefit that usually lasts for several years.  For example, costs to buy or improve your property are capital expenses.  Generally, you cannot deduct the full amount of these expenses in the year you incur them.  Instead, you can deduct their cost over a period of several years as a capital cost allowance (CCA).  For more information on CCA, see your accountant or visit Revenue Canada’s website http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-e.html#cca 

Capital expenses can include:

  • ·                         the purchase price of rental property;
  • ·                         legal fees and other costs connected with buying the property; and
  • ·                         the cost of furniture and equipment you are renting with the property. 

Property values usually appreciate (or increase) in value.  Money invested today in a traditional GIC, with their low interest rates, may not even keep up with the rate of inflation.  Investing in property can be a stable place to secure your future, as well as earn extra income now month after month.

 

For more information on rental properties in the Niagara Region, write diane.walker1@century21.ca

or call 1-888-787-2524.

Diane Walker is a sales representative with Century 21 Today Realty Ltd.,

Brokerage(Independently owned & operated),Niagara Region of Ontario

 


[1] en.wikipedia.org/wiki/Passive_income

[2] Introduction to Federal Income Taxation in Canada by Beam, Laiken, & Barnett pg 295

[3] Preparing Your Income Tax Returns by Michael G. Mallin pg 602

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Diane Walker

Diane Walker

Broker
CENTURY 21 Today Realty Ltd., Brokerage*
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