Real Estate

Is one allowed to rent a house while using a Home Buyers' Plan?

  • Last Updated:
  • Feb 21st, 2017 9:21 am
Tags:
[OP]
Deal Addict
Mar 12, 2010
1278 posts
48 upvotes
Aurora

Is one allowed to rent a house while using a Home Buyers' Plan?

As a first time home buyer, I'm considering using the Home Buyers' Plan (HBP) which allows you to use $25K of your RRSP and pay it back over 15 years. Is one allowed to rent their first house while using a HBP?
15 replies
Deal Addict
User avatar
Mar 14, 2006
4253 posts
378 upvotes
must be your primary residences and you must move in within 1 year. so no if you rent out the whole place out.
[OP]
Deal Addict
Mar 12, 2010
1278 posts
48 upvotes
Aurora
Does it need to remain your primary residence forever though? Can it be rented out after the first year or two?
Deal Addict
User avatar
Jan 31, 2006
4508 posts
787 upvotes
Toronto
mingyang wrote:
Feb 15th, 2017 12:45 pm
must be your primary residences and you must move in within 1 year. so no if you rent out the whole place out.
i always have that question. primary residence means all your mails/bills are with that address?
My Heatware no posting contact info in your sig
Deal Addict
User avatar
Mar 14, 2006
4253 posts
378 upvotes
marktang wrote:
Feb 15th, 2017 4:06 pm
i always have that question. primary residence means all your mails/bills are with that address?
your mailing address can be different from your primary residence. some people use PO box.
your drivers license better have your primary residence address though
Deal Addict
User avatar
Mar 14, 2006
4253 posts
378 upvotes
tido88 wrote:
Feb 15th, 2017 1:24 pm
Does it need to remain your primary residence forever though? Can it be rented out after the first year or two?
definitely not forever. it would be ridiculous that you can't rent out your own place. after a year, it becomes less problematic. you can even rent it out within the first year but your INTENT must be that you bought it as a primary residences. some people change jobs and has relocate and rent out their home. tax season is coming, i would definitely ask an accountant to be sure.
Deal Addict
Sep 13, 2016
1992 posts
1000 upvotes
Mississauga
It cannot be forever. Say you bought a home. 4 months later, you got this amazing job opportunity in a different city and daily commute is not an option.
It will be natural for you to move. That's why "Intent" is the keyword. The example I gave shows that you honestly intended to live in this home, but circumstances forced your hand.
[OP]
Deal Addict
Mar 12, 2010
1278 posts
48 upvotes
Aurora
Are these laws written out somewhere I can research? I'm wondering what it would take to rent out a home as a first time home buyer, using a HBP, and how long I'd have to wait to do that legally?
Deal Fanatic
User avatar
Oct 23, 2003
7694 posts
1343 upvotes
tido88 wrote:
Feb 15th, 2017 9:33 pm
Are these laws written out somewhere I can research? I'm wondering what it would take to rent out a home as a first time home buyer, using a HBP, and how long I'd have to wait to do that legally?
has to be ur primary residence for minimum 1 yr. other restrictions also apply.
Deal Addict
Aug 12, 2004
4116 posts
1478 upvotes
Calgary
Intent is key. I am renting my first condo now, but when I bought it and used the HBP, it was with the intent to live in it. A few years later I bought a house.

If you were to buy the house under the HBP, have it as a permanent for a few months, and then move out and rent it out, it would cause a red flag to the CRA. Safe bet is to stay in it at least one year to avoid scrutiny.
Deal Addict
Aug 12, 2004
4116 posts
1478 upvotes
Calgary
OP I remember you.

bought-new-house-mortgage-question-s-pr ... s-2047937/

I thought you already bought a house under a partnership? Did you buy this house under a partnership as investment / rental, without planning, and now thinking you can use your HBP towards the same house you bought under a partnership?

You are attempting to commit tax fraud my friend. Your partnership will throw a wrench into being able to use your HBP in the hopes of renting without getting caught. Playing around and trying to find loopholes to avoid taxes on what was an investment from the start is going to come back to haunt you. If you want to rent the place and planned to do it as an investment, do it right from the start. The CRA is not stupid and you will get flagged.
[OP]
Deal Addict
Mar 12, 2010
1278 posts
48 upvotes
Aurora
Firebot wrote:
Feb 16th, 2017 11:09 am
Intent is key. I am renting my first condo now, but when I bought it and used the HBP, it was with the intent to live in it. A few years later I bought a house.
If you were to buy the house under the HBP, have it as a permanent for a few months, and then move out and rent it out, it would cause a red flag to the CRA. Safe bet is to stay in it at least one year to avoid scrutiny.
So after a year I'm able to rent out the whole house, as long as I buy or rent another place? I guess I'm also allowed to rent out part of the house, like the basement, while it still being my primary residence without any scrutiny by the CRA regarding being my first primary residence.
Firebot wrote:
Feb 16th, 2017 11:20 am
You are attempting to commit tax fraud my friend.
No, I'm trying to understand what the rules and options are. Just like you who are now renting your condo, you obviously had to learn the rules before doing that. How else am I suppose to know what options are available without learning about them?
Deal Addict
Aug 12, 2004
4116 posts
1478 upvotes
Calgary
tido88 wrote:
Feb 16th, 2017 11:45 am
So after a year I'm able to rent out the whole house, as long as I buy or rent another place? I guess I'm also allowed to rent out part of the house, like the basement, while it still being my primary residence without any scrutiny by the CRA regarding being my first primary residence.


No, I'm trying to understand what the rules and options are. Just like you who are now renting your condo, you obviously had to learn the rules before doing that. How else am I suppose to know what options are available without learning about them?
The big difference is you know you will be renting this new house that is meant as an investment, but want to do so while also taking advantage of the HBP, which is a plan for first time home buyers to move and live in their principle residence. You are trying to have your cake and eat it too.

Note that your GST / HST new housing rebate is also at stake here, not just the HBP. You also would have to pretty much be living with your investment partner in the house for at least a year to avoid scrutiny. Your partnership is really what will throw a red flag, regardless of what you attempt to try. A partnership is considered a business by the CRA.

Like I said, just do it right from the beginning, it was an investment under a partnership, keep it as an investment and don't try to evade taxes.
[OP]
Deal Addict
Mar 12, 2010
1278 posts
48 upvotes
Aurora
There is nothing wrong with changing ones mind as circumstances are always changing. I'll be most likely buying this property solo now, as partner-investor will most likely be moving countries. So if one does not use the first-time HBP do the same rules apply to the home being a principal residence. So I guess it all comes back to intent as pointed out in thread. If buying a house for an investment are mortgage rates higher? I don't understand why government makes different set of rules depending what you do with the property? It's your property after all.


"Homes for rent
If you move out and rent your home, you can continue to treat the house as your principal residence for four additional years, or possibly more if you move as a consequence of a change of your place of employment with your employer. There are also rules that apply if you own property to earn rental income and subsequently convert the property to personal use. Basically, at the time of the change in use, you’re deemed to have disposed of the property at its FMV. If this value exceeds your original cost, you will have to report a capital gain. However, you can make a special election to defer recognizing this gain until you ultimately sell the home. This election is not available if you have claimed depreciation on the property for any year after 1984."
Deal Addict
Aug 12, 2004
4116 posts
1478 upvotes
Calgary
tido88 wrote:
Feb 16th, 2017 1:38 pm
There is nothing wrong with changing ones mind as circumstances are always changing. I'll be most likely buying this property solo now, as partner-investor will most likely be moving countries. So if one does not use the first-time HBP do the same rules apply to the home being a principal residence. So I guess it all comes back to intent as pointed out in thread. If buying a house for an investment are mortgage rates higher? I don't understand why government makes different set of rules depending what you do with the property? It's your property after all.
If you are a business and making income (rental income as an example), the government wants its share. That is how government works. You know that any rent you will be collecting is also taxable right? The government has basically given homeowners a break by exempting tax on capital gains on their primary residence, and also implement the HBP to help people buy their new home. Some are using this as a tax loophole for investment purposes.

And yes, a bank will treat you differently if this is meant as an investment, including higher downpayment requirements.
"Homes for rent
If you move out and rent your home, you can continue to treat the house as your principal residence for four additional years, or possibly more if you move as a consequence of a change of your place of employment with your employer. There are also rules that apply if you own property to earn rental income and subsequently convert the property to personal use. Basically, at the time of the change in use, you’re deemed to have disposed of the property at its FMV. If this value exceeds your original cost, you will have to report a capital gain. However, you can make a special election to defer recognizing this gain until you ultimately sell the home. This election is not available if you have claimed depreciation on the property for any year after 1984."
Realise that this is meant for someone who bought a house, and moved due to work / other reasons and renting themselves while renting out their owned house.

You can theoretically buy the house and collect HBP, housing rebate etc, stay in if for a year, move out and rent it and be in the clear. You still have to pay taxes on rent, and you really only protect yourself against capital gains tax, but it is a valid tactic. It's a lot of hurdles though, of course this is all assuming that you are buying on your own (which is a risk in itself) and willing to do all of this in order to save a little.

Top