Are Rental Suites a Sweet Deal?Posted: January 13, 2011 at 3:42 PM by Brian Beezley
I love HGTV. I’ve es
pecially come to enjoy the shows about real estate, but one of my favourites is Income Property. If you haven’t seen it, it’s about people who have, usually, purchased a home with the intent to rent out part of it to help cover the mortgage. The host comes in, looks at the property and then helps to renovate it to make it a beautiful rental suite. At the end, almost invariably, the home owner is thrilled with the outcome and is able to earn a large percentage of their mortgage with the rental.
Multi-family homes might be a fantastic idea for you and your family. You may even qualify for a larger home than you normally would or even be able to cut your mortgage cost in half or better. But buying a home with a rental suite brings up issues that many families would never need to consider. As with many things in life there are advantages and disadvantages to having a rental suite.
As stated, a rental suite could bring you extra income or allow you to take a large chunk out of your mortgage. If you have a $1000 mortgage and are able to rent a basement apartment for $800/month, you only have to pay $200 of your mortgage and can use the savings for home improvement, paying off your mortgage faster or anything else you want.
Having a legal rental suite in your home can also increase the value of your home. Done well, rental suites create a continued value in your home as any buyers will be able to rent the property, or better, continue renting the property to a tenant already living there. But rental properties, while being able to add value to your home also cause your home to fall into a niche. Many people who don’t want to deal with a renter will bypass your home for one where the entire square footage is usable.
Having a tenant there can also create more security for your home. If you are gone for a week, your home won’t stand empty and you can be comforted by the fact that you have someone there while you’re gone if the worst should occur. While you want to do everything in your power to find the best and most reliable tenant for your rental property, you should be aware that not everyone who will be looking for a rental is a good tenant. There are always horror stories about the bad tenants, rent not being paid, or having to call collection agencies, or worse, the police. While there is no guarantee that the renter will be the perfect tenant, checking references and thoroughly interviewing them will help. If they have rented before, check with previous landlords if you are legally allowed to do so in your area.
Sometimes your problem won’t be with the tenant, but instead you’ll have trouble finding a tenant. Before you buy, check with your local realtor. They can help you determine if there is a need for rental properties. That won’t always help during slow times of growth, but at least you can get more information.
Unexpected expenses are always something to be aware of when you own your own home. When you have a rental property, you double the things that can go wrong. Problems with wiring, plumbing or appliances can always crop up and if you have two dishwashers, you have two dishwashers that are able to break down. You should be prepared for that when you own a home, but if you have a rental you need to make sure you’re doubly prepared.
Insurance costs may also rise with a rental property. Protecting yourself and your investment is imperative to being a successful landlord. Don’t skimp on this. Insurance is there for when things go wrong, and when/if something does go wrong, you’ll be glad you paid those extra premiums.
Looking back over this post, I see what may seem to be a lot more points against having a rental suite than for, but remember to weigh those negatives against the additional income you can get from the rental suite. Having a rental suite isn’t for everyone, but many people find that it’s perfect for them.
Now, to ask the questions that need to be answered before you buy.
If you’ve read this far, let’s at least assume that you are considering having a rental suite in your home. First thing you have to find out when you’re going to buy a home with a rental suite is if the suite is a legal apartment. It doesn’t have to be legal, but make sure that you’re willing to make it legal before you rent it. If it’s going to cost $1000’s to bring the suite up to code and get the correct paperwork, is that something you’re willing to do?
You need to make yourself familiar with your local and provincial laws. Ignorance is not an excuse and some communities have very strict rules that must be followed. It’s up to you to make sure that everything you’re doing is going to be legal.
The second thing you want to know is if it’s even worth having the suite. If your new home will be only a couple blocks from a local college, it might be a perfect situation as there are always college students looking for a place to live during the year. If the new home is located in an area that is full of un-rented apartments, maybe the area won’t support another rental.
This isn’t even close to an exhaustive article. There is a lot to know before you consider renting a portion of your home, so make sure that you have the right person in your corner. Our agents will love to help you decide if a rental property is a good idea for you and your family. Call us for a free consultation. We’re here to help.