You’re crunching numbers thinking of ways to shave a few hundred bucks off your monthly mortgage. It’s not an easy task. There’s really only one meaningful way to make it happen. Look for a home with an existing rental or convert a floor in your current home into a rental. Yes, you’ll be able to supplement a chunk of your mortgage but, are you ready to be a landlord?
A lot listings with a rental basement will include a blurb like this: “Agents and seller do not warrant legal retrofit status of in-law suite”. In other words, this basement isn’t a legal rental, which is extremely common in the City so don’t sound the panic button quiet yet.
Remember though, you’re on the hook if anything happens so it’s always better to ask a few key questions before diving in:
- Zoning by-laws: Are you even allowed to have a basement apartment in your area?
- What about fire & building codes? Does this space meet the requirements (fire walls, entrance sizes, ceiling height ect.)?
- Is the electrical up to date? Does it meet safety requirements?
- Do you know if the unit is legal and registered with the City?
Before you get too excited, something a lot of clients don’t know is that any rental or income producing property requires a minimum 20% down payment – so you need the cash!
And, keep in mind that any money you collect from rent is considered income and is taxable.
So now you have the facts. Are you in?
Why do I want to be a landlord?
- With a basement apartment, you can afford a more expensive house. More expensive = nicer, probably bigger. And, with lower monthly expenses you can spend that money elsewhere – trip to Hawaii anyone?
- When you’re looking to sell, buyers will be attracted the potential income earning. Everyone’s in the same boat so this kind of relief on the pocket book is welcome.
Is this the wrong option for me?
- Are you planning on living upstairs? With that comes added noise in the house and sometimes, the smell of food. Your tenants have to live after all….
- Are you a handy person? If so, kudos. As a landlord you can expect the need for unexpected renovations & repairs.
- You have to collect rent and believe it or not, not all tenants want to pay up!
Is having a rental unit in your future? Read about some more interesting tips here.