Many home and condo owners decide to keep their first purchase as an investment. But if they decide to sell while tenants are still occupying the premises, the original enthusiasm for an income property can suddenly turn to disappointment.
Katia Samson, founder of Groupe Immobilier Katia Samson and a chartered real estate broker, has over 25 years’ experience in property sales and rentals. Here, she explains why renting out your property can, contrary to popular belief, have several important drawbacks.
The lease question
It’s essential to know the rights of tenants and the issues they will raise when you want to sell,” explains Katia. What’s more, the property must be sold and notarized six months before the end of the lease if the buyer wishes to occupy it, which is difficult to foresee when putting a property on the market.” Otherwise, the lease will be automatically renewed. The six-month notice cannot be given by the seller. Not to mention that it’s quite rare to find a buyer willing to wait six or seven months before moving into their new house or condo.
Moreover, the law clearly stipulates that when a property is put up for sale, the
landlords must give tenants verbal or written notice 24 hours in advance.
any visit from a potential buyer.
“In my team, we’ve often had to deal with tenants who don’t cooperate with viewings, whose units are unclean or very messy, making it impossible to present the unit to a potential buyer,” adds Katia Samson. Brokers also know that a rented apartment is less easy to prepare for sale. What’s more, it’s almost impossible to do a proper home staging job when there are tenants living in the property.
If the property is bought six or seven months before the end of the lease, the new owners will have to take over the tenancy, with all that this implies. A sobering thought for many people… who may not want this added responsibility when buying a new property, when the market is clearly indicating right now that the
preference is for “turnkey” properties, with few or no problems in sight.
Thousands of dollars lost
“I’ve often seen tenants offered thousands of dollars to move out, because the owners wanted to put their condo up for sale,” says Katia Samson. The other important aspect of selling a rental property is the question of capital gains. Unlike the sale of a principal residence, where the profits from the sale (regardless of the amount) are not taxable, the profits from the sale of a rental property must be added to your income. Revenu Québec is categorical: “When you realize a profit on the sale of an income property, this amount constitutes a capital gain that must appear on your income tax return.” Once again, that’s thousands of dollars that don’t go into your pockets, but rather into those of the taxman.
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