Renting Out Your House: How to Live for Cheap (er)

counting coins

Looking for a way to buy a home to live in without having to carry a giant mortgage on your own income? Buy a multi-unit property like a duplex, triplex or fourplex and move into one of the units. A well chosen property can find you living in a much better area than you could have afforded otherwise and paying a lot less “rent” than you would have otherwise done.

We did this in Toronto for a few years. We moved into a three-unit property that we owned. Our friends moved into the top floor; we lived on the main floor; and we rented out the basement to some university students.

The key benefits:

  • We did live for cheap. Our “rent” was substantially lower than it would have been if we had rented the same property;
  • Parts of our home expenses were a tax write–off, thanks to the rental income;
  • We got to live in the very desirable Little Italy area of Toronto, only minutes from a subway stop. We were also right across the street from a large off-leash dog park (which our dog Bram would stare at longingly as he sat in front of the window.)

The money we saved went towards some of our other investments, paying down student loans, and renovating this property to increase it’s value and generate more rent in the future.

It’s a great way to get into the rental market business, build your wealth and reduce your personal living costs. You’re also able to keep a really close eye on your rental and take better care of any issues that may arise.

The major drawback of living in your multiple unit rental is that the burden of managing the property and dealing with the tenants. Tenant selection is just as critical when you, the owner and landlord, are going to be living on site.

When we first moved in, we didn’t select our tenants so carefully in the tri-plex and the lessons we learned the hard way became one of the founding reasons we started Rev N You and I wrote More than Cashflow. We created a lot of problems for ourselves that were preventable!

While we were living in this property, our tenants in the basement were constantly fighting. We were often being called in to play referee until one morning at 3 a.m. it all came to a climax when one of the basement tenants pulled out a butter knife and threatened her roommate with it. The tenant without the knife was terrified, called the police, and moved out in the morning.

The knife wielding tenant stayed in our basement for two months after this but stopped paying rent. Imagine the joy we felt living above an unstable tenant who also wasn’t paying rent.

And worse for us was the fact that we could have avoided all of this by making better tenant choices.

The point here is to let you know that there are tremendous advantages and disadvantages to living in your investment property while renting out the other units to tenants. It is a great way to live for less and possibly enjoy a better home or area than you can otherwise afford. Nevertheless, as noted in the above, small residential properties with two, three or four units are a great option to consider.

Canadians – word of caution for your taxes when you use this strategy:

If you do decide to live in a property that has been a rental or will be a rental for you and you decide to call it your primary residence to avoid paying capital gains taxes on the value increase that takes place while you live there, you cannot depreciate it when it’s a rental only. If you do depreciate it, you can’t claim it to be capital gains exempt, even for the period that it was your primary residence. Plus you want to get clear on what you can and should write off, and how you can determine values for when it’s your own home versus a rental. A few hundred dollars spent on good advice could save you thousands in taxes.



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If you have questions about points raised in this post, or if you’d like to learn more, then send us a message and we’ll get back to you as soon as we can.

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