How to Enter Rental Properties
You can easily add rental properties in Snap. To do this, you only need to enter any income generated by the property (i.e. net rental income) and add the property as a Real Asset. Additionally, you can enter a mortgage on the rental (if applicable).
To enter a rental property please follow these steps.
- 1
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Enter a New Income called Net Rental
- Go to Scenario Setup -> Income.
- Click Add Income. In the Description column, enter Net Rental. Set the Amount as desired and select Yes in the Taxable column, leaving the RRSP Eligible column set to No. (See Note 4). You can specify the years that the income is applicable. A blank From Age indicates that the income starts in the first year of the projections.
Net Rental income in Snap refers to the amount of income received from tenants, minus the expenses incurred on the ownership of the property. Click here for a list of rental expenses that you can deduct.
Net Rental = Gross Income (rent) - Expenses (property tax, insurance, maintenance, etc.)
Note 1:
In Snap, we exclude mortgage interest from the definition of Net Rental because we already take it into account in the Debts section (See Step 3 below).
Note 2:
If you expect to derive higher rental income, you can index the Net Rental income with inflation. Keep in mind though, that higher rent may not always lead to higher net rental income as the expenses will likely go up with inflation too. Additionally, the interest portion of the mortgage payment will go down every year so even if the net rental income will stay at the same level, it will generate higher taxable income every year. (To specify General Inflation under the Indexing column, delete the indexing percentage in the cell. This will populate the field with General Inflation.)
You can edit the Net Rental Income on the Planning page if there are years that don't follow the inputs within the Income table. For example, if the income is expected to change at some point you can enter the updated amount directly in the year it is applicable. Make sure the Incomes section is expanded using the Expand button in the section header if you only see total incomes and not the individual ones to be able to edit them. The edited values will be highlighted in yellow to indicate an override.
- 2
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Add the Rental Property as a new Real Asset
- Go to Scenario Setup -> Assets.
- Click Add Real Asset and enter the Description, Value, and Cost of the property (important to calculate the right amount of capital gain tax) and set Capital Gain Tax to Yes.
- Once all of the fields are completed the asset is automatically saved.
Note 3:
For rental properties to be purchased in the future, you can enter the future cost of the property under the Cost column and the Future Purchase Date.
- 3
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Enter a new mortgage (optional)
Enter a new mortgage (optional).
- Go to Scenario Setup -> Debts.
- Click Add Debt and enter the Description, Balance, Interest Rate, Repayment Options and Amount of monthly payment. Ensure that Tax Deductible is set to Yes. If you link the debt to a real asset, the mortgage will be automatically paid off upon the sale of the property.
- The debt will be saved automatically once all fields are completed.
Note 4:
In Step 1, when we added Net Rental income, we selected RRSP Eligible 'No', even though the Net Rental income contributes to the RRSP deduction limit calculation. We did this on purpose because if we select 'Yes', based on the current definition of Net Rental income in Snap (which excludes mortgage interest), we would inflate the RRSP room. This could potentially cause over-contribution to an RRSP, which we want to avoid. If the amount of RRSP room generated in your scenario is significant, please adjust it every year when you re-do the plan for the client by entering the correct RRSP contribution room in Scenario Setup -> Assets -> RRSP/RRIF.