This could turn out to be a very bad choice!
It be a major mistake when it comes time to sell.
You rent it out once for a weekend and you are probably OK, but you start renting it several times over and you are now in “business”. That means that you have to report your business income on an annual basis.
That’s great for the Canada Revenue Agency (CRA). You cannot use your principal residence exemption. You have to collect HST on the full sales price. You also don’t likely qualify for capital gains tax treatment. You pay regular business taxes on the sale. That’s roughly double the amount.
Let’s assume that you bought for $1.5 million and sell at $2 million. The HST on the sales price is 13% of $2 million or $260,000.
Your $500,000 profit needs to be reported, the tax on that will be $250,000.
Brian Madigan LL.B., Broker