Introduction

In recent years, many Canadians have tapped into the lucrative potential of property ownership by using their homes as sources of rental income, especially amid sky-high housing costs. Take Amanda Kelly, for instance. She purchased a charming pre-war single-family home in Barrie, Ontario, back in 2019, primarily envisioning it as a way to generate revenue while also providing a loving home for her two rescue dogs.

"I specifically bought a house with a separate basement entrance and a detached garage," shares Kelly. "This is indeed the main reason I can afford to keep it." Her foresight has paid off: since then, she's successfully rented out her two-bedroom basement unit and is currently transforming her garage into another rental space.

Taking Bold Steps

In 2021, Kelly took a bold step: she left her stable government job to co-found a startup focused on end-of-life services, called AWAKE. In a strategic maneuver to maintain her property, she moved briefly back in with her parents and decided to rent out the main unit as well. "I wanted to build my business while still preserving my home," Kelly explains. Now she even resides in the basement, renting out the main floor, which allows her to cover her mortgage and part of her bills.

A Growing Trend

This trend is gaining traction. Kelly notes that in her neighborhood, about a third of the homes are owner-occupied, another third belong to multigenerational families, and the remaining share is home to fellow millennials who rent out extra spaces to mitigate living costs. This is a microcosm of a larger shift.

Recent findings from a Re/Max Canada survey reveal that a significant number of Canadians are considering alternative pathways to homeownership due to escalating prices. Approximately one-third of first-time buyers are exploring options beyond traditional ownership. The study also indicates that many are open to innovative solutions like co-ownership with friends or relatives, rent-to-own arrangements, or simply renting out portions of their home to alleviate financial burdens.

Challenges of Traditional Ownership

As Christopher Alexander, president of Re/Max Canada, notes, "If you're in a high-cost market like Ontario or British Columbia or if your income is limited, traditional ownership is challenging." Approximately 22% of those polled are intrigued by rent-to-own deals, and 17% find the idea of renting out part of their residence appealing. "Renting out a section of your home has been growing in popularity," Alexander adds.

Innovative Opportunities

But it's not just about traditional rentals; innovative opportunities are also on the table. Homeowners can consider renting out roof space for solar panel installations, yard space for pet care, or even garage storage. These creative options reflect a strong desire to achieve homeownership and make real estate investments increasingly viable in Canada, notwithstanding the current economic landscape.

Caution and Responsibilities

Yet, before diving into these income-generating strategies, homeowners must exercise caution and be aware of potential liabilities. Alexander advises staying organized and avoiding informal arrangements that could lead to disputes. Additionally, there are essential tax implications to take into account. Hanna Roohi, a Mississauga-based CPA, cautions that changing a property's use can trigger tax liabilities. For instance, if a homeowner decides to rent a larger section of their house, it could be considered a change in use, leading to tax complications.

Roohi emphasizes the importance of understanding these nuances, stating that anyone engaging in non-traditional arrangements or generating income from their property should seek guidance from legal and accounting professionals. Given the current economic climate, it's becoming increasingly common for individuals to explore various avenues to maintain property ownership.

Conclusion

In conclusion, the prospect of generating rental income from your home presents an exciting opportunity, but it's essential to navigate the financial and legal landscape prudently. As more and more Canadians adapt to these changing circumstances, the real estate market may just witness an unprecedented transformation. Are you ready to become a part of this evolving housing trend?