How to Set Up a Rental Property

Setting up a rental property in Snap Projections can involve multiple components: rental income, a real asset, and potentially debt (like a mortgage). The way you approach this setup will depend on how the rental property fits into your client’s financial plan.

Take a moment to consider what matters most for the plan:

• Is the rental property simply a source of income, particularly pre- or post-retirement?
• Is it an asset the client plans to sell, transfer to an estate, or hold long-term?
• Does the client have an associated mortgage, and should that debt be modelled?

You may only need to reflect one or two of these components, or you might need all three.

Rental income in Snap Projections behaves differently depending on whether or not debt is being modelled in the plan. This section walks through how to add rental income, but also outlines some special considerations to help you decide what works best for your client.

1. Go to Scenario Setup → Income.
2. Click Add Income. 
3. In the Description column, enter Net Rental Income.
4. In the Amount column, enter the expected annual net rental income (see understanding net rental income below).
5. If there is a spouse included in the projection, for the Joint column, select Yes only if the income is shared.
6. To adjust income over time, use the Indexing column (see special considerations for indexing below).
7. Set the Type of income to Other.
8. Set Taxable to Yes (rental income is taxable).
9. Leave RRSP Eligible as No (see note below).
   1. If there's no debt involved, it’s safe to simply mark net rental income as RRSP eligible.
10. Adjust the From Age and To Age to reflect the income period. (These can be fine-tuned by calendar date to prorate income in the first or last year.)

Understanding Net Rental Income

Net Rental Income = Gross Rental Income – Deductible Expenses

Examples of Deductible Expenses include:

• Property taxes
• Interest on mortgage payment (if you're modelling the mortgage on the Scenario Setup → Debts page, you will not reduce the gross rental income by the interest payments. Snap will automatically account for the cash flow and tax implications of the mortgage separately. If you're modelling the mortgage, you'll enter the gross rental income net of non-debt deductible expenses.)
• Insurance
• Repairs & maintenance
• Utilities (if paid by the landlord)
• Depreciation (Capital Cost Allowance)

Click here for a list of rental expenses that you can deduct.

Special Considerations for Indexing Rental Income

Indexing isn't just inflation here. Its meaning depends on whether debt is being modelled:

• If you've modelled the mortgage in Snap, or the property is mortgage-free:

  In this case, your net rental income includes gross rent and your selected deductible expenses (e.g., property taxes, insurance, maintenance). If all of these values are expected to increase over time with inflation, you can use the General Inflation Rate. If the deductible expenses are expected to increase faster than the gross rental income, you may be best leaving the indexing at 0%.

• If there is debt that hasn't been modelled in Snap:

  In this case, your net rental income includes gross rent and your selected deductible expenses (e.g., property taxes, insurance, maintenance). It should also include a reduction for interest expense. Since interest typically declines over time, net income will naturally grow. Indexing can help simulate that growth.

Why leave RRSP Eligible as “No”?

Net rental income counts as earned income for RRSP contribution room. However, if debt is modelled in Snap and the interest on debt is marked as tax deductible, Snap does not reduce the RRSP contribution room by that amount. Therefore, if you set RRSP Eligible to "Yes", it may lead to an inflated RRSP contribution room in the plan.

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If the property itself is part of the plan, either because of its current value, future sale, or estate considerations, add it as a Real Asset.

1. Navigate to Scenario Setup → Assets.
2. Select Add Real Asset.
3. Enter a Description (e.g., “Rental Property – 123 Main St”).
4. Include the Value (current market value).
5. Add the Cost (original purchase price for capital gains calculation at the asset's sale or for taxes due on the estate).
6. Include the Appreciation value of the property as a percentage (Snap will assume the default inflation rate).
7. If the property is currently owned, leave the Future Purchase Age blank. If they're looking to purchase the property in the future, enter the age or date at which the property will be purchased.
8. If the property will be sold in the future, enter the Future Sale Age.
9. Select whether the property will be a Joint Real Asset by selecting Yes or No (if a spouse is included in the projection).
10. Set Capital Gain Tax to Yes.

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If the client has a mortgage on the rental property and you’d like to track its impact on cash flow, taxes and net worth, add it under Debts.

1. Navigate to Scenario Setup → Debts.
2. Select Add Debt.
3. Enter a Description (e.g., "Rental Property Mortgage").
4. Enter the Balance of the outstanding mortgage amount.
5. Include the Interest Rate on the mortgage.
6. Enter a Future Start Age if the property is being purchased in the future.
7. Select a Repayment Option (Interest & Principal or Interest Only).
8. Enter the Monthly Payment Amount.
9. Set Tax Deductible to Yes (mortgage interest on rental properties is tax-deductible).
10. Link the mortgage to the rental property under the Real Asset column. If the property is sold, the mortgage will be automatically paid off in Snap.

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Additional Tips and Reminders

Editing Rental Income Over Time

If rental income changes at any point (e.g., due to renovations or market shifts), edit the amount directly on the Planning page. Expand the Incomes section to view and override specific years. Changes will be highlighted in yellow.

Selling the Property

If the client plans to sell the property:

• Stop rental income in the same year.
• Set the Future Sale Age for the asset accordingly.
• Ensure the mortgage is properly linked so it’s paid off upon sale.

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