Tags: Real Estate, Renting, Basement, Apartment
Imagine taking that dusty old basement and transforming it into a source of revenue. Whether you are an existing homeowner, or you are looking to enter the housing market, the idea of using your basement space as a source of revenue is frequently discussed in many households.
The idea of opening up part of your home to a stranger can seem unsettling, but there are a number of benefits to doing this that may outweigh the cons depending on your scenario.
In this post we will take a look at some of the obstacles that you will need to overcome before you can open the door to invite new tenants in.
Where to start?
The first step is to know the exact dimensions of your basement space. The size of the space along with the location of your home and the quality of the space you will be offering will help you estimate how much rent you can charge. To help you determine what is a fair market price, a good practice is to check out listings in your area for basement apartment rentals and compare what they are charging and what the finishes and spaces of those apartments are like. If you have a basement that is already finished you can decide what upgrades you may want to do before listing your space to ensure your apartment is up to standard for your neighbourhood, or to help give your listing an edge over others in the area. If your basement is unfinished you have much more work to do before you can list your space. The good news is that you also have more control over what the finished product will look like. With a ballpark monthly income in mind let’s take a look at the pros and cons of renting out your basement as an apartment.
The Pros
Supplemental Income
Everyone wants to make a little extra cash. Renting provides you with a supplementary income – it is highly unlikely that you can survive off what you make in rent, but this extra income can help with your mortgage payments, property tax or buy things for yourself or family that you may otherwise not have been able.
Renovating adds value to your home
Whether you are starting from scratch with an unfinished basement or renovating your existing basement footprint, the investment that you put into these renovations will generally increase your home’s resale value.
Security
There is a good chance that your new tenants will remain on your property even when you are away travelling. This can give you an increased sense of security since your home will not be completely empty for any length of time.
The Cons
Taxes
Any additional income that you earn from your rental unit will have to be reported come tax season. While the extra cash is obviously welcome, it could also potentially push you into another tax bracket. Be sure to speak with your accountant to review how the new income could affect your taxes, or if you do your taxes yourself have a look over the numbers before jumping into a rental situation.
Privacy
Bringing a tenant into your house will mean giving up a certain amount of privacy. Many basement apartments will have their own separate entrance. This can help minimize any disturbance for the primary resident, but is still something to be aware of. Another item of privacy to consider is if part of your accommodation terms allows the tenant to use a shared space with you – for instance, the backyard. By allowing shared or even private access to some outdoor space you can often charge more for rent, but at the expense of some level of privacy.
Noise
Having a tenant living in your basement means that there will be times when said tenant will make noise. You have to be able to tolerate a certain level of noise from your tenant. And your tenant will also have to handle some noise from you. This is where picking the right tenant can be crucial. Finding someone who will respect your property, your space, and be cognizant of their noise levels at certain times of the day will help ensure a healthy tenant-landlord relationship.
Repairs and responsibilities
As the landlord, you are responsible for all repairs and problems that may arise with the rental apartment. Any time there is a leaky faucet, blown fuse, or damaged appliances you can expect a call, text, or email from your tenant. The cost for repairs and maintenance can quickly add up and can seem to occur more often when housing tenants. It is important to set aside money for the inevitable repairs that will be needed to ensure you are not caught in a financial bind when they do.
Conclusion
Renting out your basement is an attainable source of income if you are setup to do it properly. Now that you know the basics, you are better equipped to decide if renting out your basement space is the right choice for you.
