How to Rent Your U.S. Home: The Ultimate Guide for Canadians with U.S. Property

If you’re looking for a vacation home, investment property or even a principal residence, you may be finding prices high and supply low here in Canada. With U.S. home prices roughly 20% lower on average compared to Canada – and availability generally better – the U.S. can be an attractive homebuying option for Canadians.

Renting versus buying in the U.S.

First things first: If you haven’t yet purchased a U.S. property, you may be debating whether to buy or rent a place. As you might expect, there are several factors to think about.

For one, buying is more of a time commitment than renting and requires not only some upfront cash for a down payment, but also the commitment to maintain the property. Maintenence is both physical (cleaning, mowing, repairs) and financial (mortgage payments, taxes and home insurance). However, buying a home gives you the opportunity to build equity in your property, form roots in a community and enjoy the privacy and convenience that comes with owning your own space.

Renting a home is less of a commitment and allows you to pay only for the time you’re using the property. It also affords you the flexibility to try different areas and states, should you wish to travel to new places each year.

If you decide to buy, weighing the pros and cons can give you valuable insights into a potential renter’s mindset. Privacy, community and flexibility are all likely important factors for renters who simply came to the conclusion they want a cross-border experience without the commitment.

Pros and cons of renting out your U.S. home

No matter how much time you spend at your U.S. property – whether it’s half the year or just a couple of weekends here and there – renting out your home when you’re not there may be appealing.

• You can earn U.S. income on the rental – with the U.S. dollar stronger than the Canadian Loonie over recent years, the ability to earn USD is a definite plus.

• Rental payments could provide cash flow to cover some of your U.S. expenses without the need to convert cash.

• Your mortgage, taxes, insurance and/or homeownership association fees might be partially covered by this U.S. income stream.

• Rental income may also yield tax benefits for deductible expenses – as a landlord, you might be able to deduct trips to the U.S. and home renovations.

There are, however, some drawbacks to consider.

• In some municipalities and homeowners’ associations there are restrictions about renting your home for less than a month. So, before you do anything, check the bylaws to ensure your rental plans comply with the rules. 

• Finding renters could be time-consuming and at times prove challenging. If you’re in a sunbelt destination, for instance, you may only be able to secure renters during certain months of the year when snowbirds are looking for an escape from the cold back home.

• Should your renters cause some damage to your home, unexpected repair costs could eat into your rental income.

• When your home is rented out, you’re not able to use it – so you’ll want to balance your income opportunities with your desire to use your home whenever you want.

How to prepare your home for renters

Once you have decided to rent out your U.S. home, it’s time to get it ready for renters! Depending on the current state of your home, this could be a relatively small task or a sizeable project. Here are some tips to consider:

• Check for issues. It’s important that your home is problem-free before renters move in. Be sure to inspect your core systems such as heating and cooling, electrical and plumbing to ensure everything is running as it should be and that there are no potential problems. Checking your roof, appliances and doors and windows is also a crucial step. 

• Schedule some preventative service. Some problems are not visible to an untrained eye, so getting a pro in to test and inspect the key functions of your home is a good idea. Keep in mind, it’s far easier to do maintenance and repairs before you rent your place, versus dealing with issues once someone else moves in.

• Give your home a deep clean. Go beyond a surface clean and scrub appliances and tidy closets to set the right tone for renters. It’s also a good idea to have your carpets shampooed and your air filters replaced as part of this process.

• Lock away anything you don’t want touched. Whether you use a room, a closet or a cabinet, securing those possessions you don’t want renters to see or use is an important step in your preparation. 

• Run things by your neighbours. Getting friendly with the people next door or across the street can give you the peace of mind that they’ll keep an eye on your place while you’re renting it out. It’s also a nice courtesy to let them know your plans so they’re not surprised by a new family moving in!

Short-term or long-term rental?

As you get ready for renting your U.S. home, consider whether you’re open to short-term or long-term rentals – or both. 

You can typically charge more for short-term rentals and take advantage of seasonal demand – such as spring break, popular music festivals in the area or national holidays. While there may be more frequent preparation and clean up after short-term renters, the income you could earn may more than offset the extra expenses. If you prefer to stay in your U.S. home occasionally throughout the year, the short-term rental route may be the way to go. 

Long-term rentals won’t demand the same rental rates but can offer stability and steady income should you get reliable renters who are eager to stay a while.  If your U.S. home is more of an investment property that you don’t intend to visit very frequently, or you’re a few years away from retirement and want to bank some income until a more permanent move, a long-term tenant may provide you with the cashflow that can help cover the ongoing costs of homeownership.

Other tips and considerations

With the big decisions out of the way, you’ll want to understand the other ins and outs of renting your home. Here are some of the main factors to become familiar with:

• Taxes. If you rent out your U.S. home for more than 15 days per tax year, you have to pay income tax on your rental income. The good news is, you can also deduct certain rental property expenses, such as maintenance costs, property management fees, property taxes and travel costs to and from the property. Take a look at What to Know Before Renting Out Your U.S. Home for more about filing taxes on rental income. It’s also worth reaching out to a tax professional who specializes in cross-border planning for more guidance on handling this part of renting your vacation home.

• Rental rates. When renting out your home, you want to charge enough to make it worth your while, but not so much that you turn away potential renters. It’s a good idea to look at rental sites such as Airbnb, VRBO and HomeAway to see home listings comparable to yours. Alternatively, you can connect with a local realtor or property management company for help in setting your rental rates and renting your home.

  • When setting your rates, remember to factor in seasonality – for example, homes in popular sun destinations can command higher prices during winter months. If you’re looking to rent your home in the fall, meanwhile, you may need to drop your rates accordingly. If you’re renting out your property year-round, take a look at prices at different times of year to set an average price that accurately reflects market value. 

• Tenants. The plan to rent out your home only works if you can secure the right tenants. If you’re going the short-term rental route, this is relatively straightforward, as you can list your home on popular rental sites and accept rental requests that you like the look of. Note, you don’t have to rent out your home to the first person who wishes to make a booking – you have the right to vet potential renters and reject anyone with a bad rating or unreasonable demands.

  • If you’re looking for long-term tenants, you can advertise your home on national sites such as Craigslist, CanadaStays and Airbbnb, which isn’t just for short-term rental listings. Again, a property management company can make things easier for you, as they can take charge of showing your home, finding and vetting tenants and drawing up lease agreements. A local realtor can also take care of everything for you – from advertising your place to conducting background checks to managing the property once it’s rented.

• Maintenance. While you may have done a great job preparing your home for rental, issues may still arise unexpectedly – and you’re responsible for any maintenance or repairs on the property. Whether you work with a property management company or have a local repair service on call, you’ll need to set up some kind of process for maintenance and repairs while you’re back in Canada.

• Insurance. Once you’ve decided to rent your U.S. home, you’ll need to switch to a landlord property insurance policy to cover any loss or damage that might result from tenants’ negligence, natural disasters, fire or water damage. While you’re at it, make sure you have liability insurance to cover slip and falls or other injuries tenants (or their guests) might have on the property.

• Ground rules and agreements. To protect both you and your renters, it’s crucial to have a rental agreement in place – regardless of how long the rental period might be. Items to outline in the agreement may include the amount of the security deposit (and what it covers), whether or not pets are allowed, whether utilities are to be paid by the tenant or the landlord, access for maintenance and rental rates. It’s a good idea to have a lawyer look over the lease agreement to ensure you and your home are protected before you present it to your tenants.

Renting your U.S. property may be an attractive option for many Canadians. Perhaps you’re nearing retirement and are looking for a steady snowbird lifestyle in a couple of years. Maybe you’re priced out of big Canadian markets but wish to build equity in a home while earning some extra income. Or perhaps you’d simply like to get your vacation property working for you while you’re back in Canada. Whatever your situation, renting out your U.S. home can help provide extra cash flow that can help you reach your financial goals. 

 

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