What are the investor rules for purchasing an investment single family dwelling?
Does my existing house's rental income count as part of my income qualifications? What about the potential income from the investment house?Does that count to qualify for the mortgage? I know you can't do this for your principal dwelling, but is it different for investment/rental housing?
I know I need a min. 20% down, but if I go only the min 20%, do I still need CMHC mortgage insurance as it is below the 25% level?
I know that all expenses can be written off against rental income, but if I have more expenses than rental income, can I write it off against my employment income? If so, how far (ie how long, how many years) can I do this before CRA deems it an investment not having a reasonable expectation of making a profit, or does that even come into play with real estate?
Yes, existing rental income does count, but only a percentage.
Yes, potential rental income does count, but only a percentage.
20% is the minimum that may waive you from CMHC. However, there are other consideration too. Bank may insist that you need CMHC regardless. One of my friend needs 35% down to waive the CMHC requirement.
Yes, you can write against employment income.
You can claim a loss indefinitely under certain circumstances (far too many variables to answer that the same for everyone) but of course you would not be able to use any portion as principle residence at any time.
i.e. if this is a duplex and you rent out both units and take a loss, then you can claim a loss indefinitely . If you were to live in one unit, then no.
- only part of your current and potential income will be included for qualification purposes
- if you are struggling to qualify under current conditions you probably should forget this idea
- residential real estate is one of the most risky options out there today
- current real estate costs are unsubstantiated and could fall dramatically costing you a fortune
- many other investments let you sleep at night, why get into an investment that could
wake you up with gross and trivial emergencies or have you subsidizing a
deadbeat that you can't evict?
You're willing to part with 100% of your money to gain < 50% back as a deduction?
You are hedging on asset appreciation bailing you out of negative cash flow real estate holdings... good luck with that gamble.
- unless you're prepared to do some unsavory things, big profits may be hard to come by
your deductions will not be denied for failing the 'reasonable expectation of profit' test. its pretty dumb to buy a property that is not instantly cash-flow positive especially at today's extremely low interest rates.
What your lender requires as a downpayment is between you and your lender, including the requirement of CMHC insurance. 20% is the minimum without CMHC insurance at a Canadian chartered bank.
I found this to pose a very interesting question and it ends with cra being able to deny expenses which do not have the "pursuit of profit" in mind.
To go back to the OP, it would depend on what sort of expenses he's claiming. If he's actually reinvesting money into the property and the payoff is when he sells for a large profit later, then it makes sense. As stated before he is losing cash flow in the attempt to reduce taxable income.
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