When purchasing a newly-built property with the intention of utilizing it as a rental property, GST/HST is paid as part of the transaction, however you may be eligible for a GST/HST rebate.
The new residential rental property rebate (NRRP) is applicable provided you have a Tenant who has signed a lease for at least one year duration (month-to-month leases are not applicable). When you purchase a new residential property to for income-generating purposes, the builder or developer is not permitted to apply for the new home HST rebate on your behalf - unlike like they would if the property was going to be your primary residence.
Consequently, the Buyer will be required to pay the HST for the property up-front, and then will have to apply to receive a refund from the Canada Revenue Agency. Be prepared - as this can put a temporary financial strain on Buyers that may not have budgeted for the additional cash-flow and interest expense.
We highly recommend engaging a financial planning professional to maximize your rebates, and ensuring you apply for your full HST rebate as quickly as possible upon closing of your property. One of the key criteria is ensuring you have a fully-accepted ‘agreement to lease’ prior to the closing date of your investment!
Have questions about buying your first income property? We are here to help! Contact The MAC Team any time for advice and guidance.