Do I Need an Appraisal When I Turn My Home Into a Rental?

Usually, yes. When you move out of your home and start renting it, the Canada Revenue Agency generally treats that as a change in use. You are considered to have sold the property at its fair market value on the date the use changed, and to have bought it back at that same value. There is no sale price to point to, so an independent appraisal as of the change date is the most reliable way to document the value your accountant reports, or keeps on file in case the CRA asks.

The same idea applies in reverse. If you move into a property you have been renting out, that is also a change in use, and the value on that date matters.

What Counts as a Change in Use?

The common situations we see in London and across Southwestern Ontario include:

• Moving out and renting the whole house: a job change, a move to a bigger home, or a move into care, where the original home is kept as a rental.

• Moving into a former rental: an owner who has rented out a house or condo decides to live in it.

• Converting part of a property: creating a separate unit that is rented out, such as a basement apartment or an additional residential unit.

Whether a particular situation is a change in use for tax purposes is a question for your accountant. Our role is to provide the value once the date is known.

Why the Date Matters So Much

Capital gains are measured from one value to another. When a home becomes a rental, the value on the change date usually becomes the starting point for any gain on the rental years. If that value is understated, more of the future gain may end up taxable. If it is overstated, the figure may not hold up if the CRA reviews it.

Because the change often happened months or years earlier, many of these appraisals are retrospective. The appraiser researches comparable sales and market conditions as of the change date, not today. A property tax assessment is not a substitute, since it is prepared for taxation as of a fixed base date. We explain that difference in market value vs. assessed value.

The Elections Your Accountant May Discuss

The Income Tax Act includes elections that can change how a change in use is reported.

• Home to rental: you may be able to elect to be treated as if the use had not changed. While the election is in place, you can generally continue to designate the property as your principal residence for up to four years, and longer in some job relocation cases, provided no capital cost allowance is claimed on it.

• Rental to home: a separate election may allow you to defer the deemed sale when you move into a former rental, with conditions, including that no capital cost allowance was claimed on the property for the rental period.

• Part of a property rented: the CRA generally does not treat renting part of a home as a change in use when the rental is secondary to your own use, no structural changes are made and no capital cost allowance is claimed. Larger conversions may be treated differently.

Even with an election, a documented value as of the change date is useful. If the election ends, or the property is later sold, your accountant has a supported starting point instead of a reconstruction years after the fact. Your accountant applies these rules. We do not give tax advice.

What the Appraiser Needs From You

A retrospective appraisal is only as good as the information about the property as it was on the effective date. Helpful items include:

1. The effective date: the date your accountant has confirmed as the change in use.

2. The property’s condition on that date: photos, a past listing, or inspection notes if you have them.

3. Changes since then: renovations, additions, a new unit, or anything removed, with approximate dates.

4. Rental details: when tenants moved in, and which parts of the property they used.

5. Your accountant’s contact: so the report addresses the right purpose and date.

If the property has changed a lot since the effective date, the appraiser describes it as it was, and the report explains how that was established.

Local Considerations in London and Area

Market conditions in London, St. Thomas, Woodstock and the surrounding towns can shift noticeably over a few years, and older housing stock near the core often differs from newer subdivisions on the edges of the city. A value for a past date has to reflect the sales and conditions in that specific neighbourhood at that time. See our London, St. Thomas and Woodstock area pages for the communities we cover.

Frequently Asked Questions

Can an appraisal be done for a date several years ago?

Yes. Retrospective appraisals are common for change in use. The appraiser uses comparable sales and market conditions as of the effective date, together with what is known about the property’s condition at that time.

Can I use my MPAC assessment instead of an appraisal?

An MPAC assessment is prepared for property taxation, valued as of a fixed base date across many properties. It is not an opinion of fair market value on your change in use date.

Do I need an appraisal if I only rent out a basement unit?

It depends on the facts, including how much of the property is rented, whether structural changes were made and whether capital cost allowance is claimed. Your accountant can tell you whether a value is needed.

Who should order the appraisal, me or my accountant?

Either can. What matters is that the appraiser knows the purpose and the exact effective date. Many owners order directly and share the report with their accountant.

Does Riverbend provide tax advice?

No. We provide an independent, CUSPAP-compliant opinion of fair market value. Your accountant or tax advisor applies the tax rules.

Getting a Value for Your Change in Use Date

If your home has become a rental, or a rental has become your home, a fair market value appraisal as of that date gives you and your accountant a defensible figure. Learn more about our capital gains and CRA appraisals, see how we work with lawyers and accountants, or request an appraisal with the address and the date your accountant needs.