Some people have been writing to me asking about an update on the status of my basement suite. I didn't want to write about it prematurely because I hadn't rented it out at the time. Now that I have some tenants on a one year lease, I feel more comfortable sharing my experience, so that my words don't bite me in the a** like last time. 😉 (In case you didn't know, I was VERY excited to get student tenants who were 110% interested – or at least seemed to be – and they flaked out last minute and didn't respond to my calls)
Many people in Vancouver have basement suites and mortgage helpers to help pay down their mortgages faster. Getting a mortgage helper can be a pain in the butt, and some people would rather not bother with the extra headache.
Here are a few steps to start you off on the mortgage helper path:
1. Think about your goals (er.. wants) before you list the ad:
- Do you want a one year lease or do you want to rent month to month?
- If you are renting month to month, are you comfortable with a possibly lengthy period of no mortgage helper?
- Who do you want to ideally rent it to (obviously you can't be discriminatory) but if you prefer students you can state that in your ad (the downside to students is that a- they are likely poor, b- they may have crazy parties, and c-they may leave during the summer, leaving you with an empty basement)
- How much do you want to list the suite for? Looking at other ads in the neighbourhood may help you decide where to start. If you price it too high, people will expect more and you may get more complaints and demanding tenants who want to get their money's worth.
- MOST IMPORTANTLY, make sure you have a significant cash cushion (aka emergency fund) in case you need to repair something (you never know when the stove is going to break or you need a new toilet).
2. Is your basement suite up to snuff?
Many people in Vancouver live in basement suites but do not want to live in basement suites that are moldy, dark, and damp. Try your best to make your basement suite liveable (would you want to live in it?) and your tenants will be happy. We got a new kitchen corner and created a new bathroom. Telling your potential tenants that the shower has never been used and is brand new might attract them to rent it just so they can the be first to use it. 😉
Lots of people have illegal suites (that means that your home is not up to code and if someone reports you, you're in deep doo doo). Often landlords get reported to City Hall by neighbours who are annoyed with the increased noise, extra traffic, extra strangers mulling around, or even by an angry ex-tenant themselves. The consequences of this can be pretty dire- if you're not up to code, the City may ask you to convert it to be up to code, or they may shut down your rental. Converting a suite into a legal suite though, can be very expensive. You would also need to purchase an annual permit to maintain your legal suite– this doesn't cost very much ($50) and the plus side is that it can look very official hanging on the wall.
Another thing is to make sure there is sufficient insulation between the basement suite and upstairs (though sometimes you can't help this). You don't want to have angry sleep deprived tenants if you can help it. Adding more carpeting and fabric within the basement suite rooms and on the upstairs floor can help decrease the sound transfer.
You will probably still hear mumbling and or muffled conversation. Try your best not to eavesdrop and block the paranoid thoughts in your own mind that your tenants are listening to you move around upstairs.
3. To include utilities or not… that is the question!
Are you planning to have the tenants pay a portion of the utility bills? Or are you planning for them to pay a flat monthly rate and you can absorb the cost?
The PROS to having the tenants pay a portion of the utility bills is that they will have more responsibility to decrease electricity consumption (you won't see lights turned on and laundry machines going 24/7.. nope..! You know why? Because they're paying for it!)
The CONS to having tenants pay a portion of the utility bills is that tenants find this annoying and may not be attracted to your rental because of this. Everyone wants guaranteed payment per month so they can budget. If it's a wild card, they will be less likely to commit to your rental. This is what we found with our ads. We initially wanted 50% of the utilities and no one bit. Then we included the utilities and found great tenants who were willing to sign a year's lease.
The CONS to paying for your tenants electricity is that they MAY (depending on the type of tenant you rent it to) take this as “all you can use” and you may see skyrocketing bills because of this. My mother (she is quite the nonassertive individual) has a tenant in one of her rental properties who plays the radio for most of the day for his pet birds. Her electricity bills are pretty high because of this.
4. Take Lots of Pictures
Taking pictures (with good lighting in the pictures) is important to show in your ad. Just like you're less likely to buy something on eBay without a picture, most people are less likely to follow through with a rental ad without a picture.
Take pictures of the kitchen area, the bathroom, and the bedrooms. Just like bathrooms and kitchens sell homes, bathrooms and kitchens are very important to potential tenants. Have measurements ready of the bedrooms in case people ask about the size of them.
Stay tuned for Part II of How to Rent out Your Basement Suite.
Same Bat Channel, Same Bat Time!
Readers, any tips on initiating the land lording process? Did you go with a traditional lender like a Big Five Bank or a Mortgage Broker to get the best rates for yourself?