Benefits & Drawbacks of Basement Apartments from the Landlord’s Perspective

So what really are the benefits and drawbacks of basement apartments from the Landlord’s perspective?

Renting out your basement is an enticing option for those of us in a market that have a very low vacancy rate combined with a high employment rate.

If you’re a first time homebuyer in a market like Guelph, finding a home that has a basement apartment that you can rent out is a sought after way to subsidize your mortgage payment.

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.

At first this seems like an easy decision however let’s look at the pros and cons of a rentable basement apartment.

Let’s look at the benefits;

Steady source of income if you have the proper tenants. I’ve had many clients not do the proper due diligence and wind up with endless bounced cheques and N4 forms. In the event you get the right tenant, there is nothing better than having a client subsidizing your monthly mortgage payment.

The second an maybe the most is the value your rental income adds to the value of your property. 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. In turn when you list your residence for sale it does nothing but add value, especially if it’s done properly.

I supposed the third consideration is that your residence is always occupied. Not along the same theory as point one where it’s a first home purchase but if you’re a resident that spends time on vacation or at the cottage there is some piece of mind knowing that you’re not leaving a vacant home for an extended period of time.

Now let’s consider the negative factors;

First the most important the 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. Also major concerns are abiding by the first and bylaw regulations, frequently these issues are pushed aside thinking the Landlord wont get caught. The consequences for not abiding are dire as you could be responsible for loss of life due to poor evacuations adherence.

Secondly repairs; 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.

Lastly your income generated could create tax costs, you may have to pay tax on income from rent and any unsheltered investments you make with your rental income, and part of the capital gains when you sell the home if you deduct a portion of your mortgage as an expense.