Last week, Brittney Morgan wrote a great piece for Apartment Therapy on the benefits and drawbacks of basement apartments from the renter’s perspective. What the article doesn’t address is the pros and cons of renting out a basement from the point of view of the landlord.
Renting out your basement is an enticing option for those of us in the Greater Toronto Area, especially young people who are buying a home for a first time. Collecting rental income is a lucrative way for young homeowners to help pay the oft-excessive mortgage. However, there are definite drawbacks when it comes to renting out a slice of the property you live in.
If you’re thinking of becoming a live-in landlord yourself, consider this rundown of the 3 biggest pros and cons of renting out your basement apartment.
Benefits of Renting Out Your Basement
- Steady source of income. If you price it right and account for the extra utility costs a renter will bring, you can leverage the rental income to help pay your mortgage, property taxes, or other bills. This can help you pay off your mortgage years earlier.
- Adds value to your home. Having a finished basement apartment increases the resale value of your home, as it will appeal to future homeowners who are thinking along the same lines as you. It expands the appeal of your home to a wider demographic of potential buyers.
- Free house-sitter. When you go away on vacation, you can feel better knowing there will be someone there to keep an eye on things. If you build a good relationship with your tenant, they may even be willing to help out by feeding your pets or watering your plants while you’re gone.
Renting Out Your Basement: Challenges and Drawbacks
- Higher utility bills. Having a tenant in your home means your water and energy consumption will go up. This can eat up any cost savings you’d earn from your rental income if you aren’t careful. If you want to track the tenant’s usage and charge them monthly utilities on top of the rent, you will have to pay to have a second meter installed.
- Legal issues. Being a landlord means you have to follow the residential tenancies laws in your province or else face hefty fines and legal claims. You will have to stay on top of repairs, obey the law in terms of how you collect rent, etc. Renting out your business apartment can involve other legal issues as well, such as civil claims, municipal bylaws, and human rights laws.
- Costly repairs. You will be responsible for maintenance and repairs in your basement apartment, which can quickly add up if you don’t stay on top of things. Think of how much money you spend on home renovations and repairs — can you afford to pay double that amount? As with utility bills, repairs are a potential pitfall that can evaporate your rental income.
Don’t be discouraged! Renting your home can be a great idea — if you do it right. Just be sure to crunch the numbers and consider whether you are ready for the responsibilities that come with being a landlord.