STRESS-FREE PROPERTY MANAGEMENT

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Back to: Landlord Success: Proven Strategies & Practical Advice for Stress – Free Property Management

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ACCOUNTING: Yes; you must do accounting. You need to track all your income and expenses for each property separately.

  • Set up a spread sheet, one common Excel spread sheet for your entire rental business. Create a separate workbook page for each property.
  • Go into your spread sheet and set up line items for
    • Income:
      • Rent 
      • Laundry etc. (for Coin-op machines)
    • Expenses: As Listed on the T776 Statement of real estate rentals CRA Tax Schedule. Keep in mind depending upon the number of properties you own, and where they are located, you may not be entitled to all of these deductions (such as wages, motor vehicle expense, travel).  Confirm the current rules with your tax accountant.
      • Advertising
      • Insurance (property)
      • Interest and bank charges
      • Office Expenses
      • Professional fees (Legal and accounting fees)
      • Management and administration fees
      • Repairs and Maintenance
      • Salaries, wages and benefits
      • Property Taxes
      • Travel
      • Utilities
      • Motor Vehicle expenses
      • Other expenses
  • Review the sample tax spread sheet in the Downloads section.
  • Make the tax sheets (workbook) for every property the same so that you can link all entries easily up to the main Summary page.
  • If there are multiple partners on each property, make sure you show all partners with their percentage split for tax purposes.
  • Go through all your receipt slips and reconcile them with the Credit Card statements, so you do not miss any expense receipts. Do this often, not just at the end of the year as you will forget.
  • To make life easier you may want to allocate a dedicated credit card just for your rental expense purchases.
  • The goal is to end up with one spread sheet that you can use for your taxes (or send to the accountant).

TAXES: Yes, you must pay taxes yearly.

PLEASE TALK YOUR TAX ACCOUNTANT, I AM NOT A TAX EXPERT (and the rules change frequently).

  • Depending upon how you own your properties you may be filing either Personal or Corporate taxes (if the corporation owns the property).
  • These taxes will be filed on the yearly income (loss) of your total rental portfolio.
  • If you have a good day job and you’re in a high tax bracket, you may be able to lose a bit on your rental properties as it may not be a bad thing tax wise. (Don’t loose too much or you will not qualify for more mortgages).
  • Tax planning in advance is the key especially before getting a new mortgage. 
  • PERSONAL TAXES
    • This amount will typically be added to your personal account as RENTAL INCOME LINE 12600 with the use of the T776 Statement of Real Estate Rentals Schedule
    • This income will be added to your personal income that you have received from your employer, or any dividend income from other corporations.
    • Tax preparation for personal taxes will be less expensive than Corporate Tax preparation.
  • CORPORATE TAXES
    • The expense write offs may be similar.
    • The tax rates may be a bit less (check with your accountant).
    • The cost to prepare the taxes may be much higher.
  • CAPITAL GAINS
    • When you sell the property, you will need to pay tax on the profit you have realized (Sale Price less Purchase Price).
    • If you've earned profit from selling your investment property, you will be required to pay capital gains tax. Capital gains or losses are realized only when assets (such as stocks, bonds, precious metals, REAL ESTATE, or other property) are sold.
    • In Canada, currently only 50% of the total capital gains is taxable. It is included in your annual taxable income and taxed at your marginal tax rate.
    • If you are fixing and flipping properties, this Real Estate is considered inventory and you will not get the benefit of the decreased capitals gain rate. Check with your tax accountant for current rules. 
    • Keep in mind if you have other Capital Losses for other bad investments (stocks etc.) you may be able to decrease some of your capital gains payable.