Investment Property Purchasing With Rental Income in Mind
SHOPPING FOR AN INVESTMENT PROPERTY?
Purchasing With Rental Income in Mind
The purchase of your first home is a large investment and one that involves a significant financial commitment. Homes with legal suites are a great option for the first-time homebuyer seeking a home to both live in and build equity from, plus gain some revenue from a basement suite renter.
First-time homebuyers can request their real estate agent to do a search for properties that possess a ready-built suite or have the potential in which to build one. A property that already has a separate entry and two separate kitchens, or water hook-ups in an area where appliances could be installed, would be optimal. Kitchens are one of the more expensive rooms of a house to finish oneself.
Alternatively, first-time home buyers may seek out newer homes with unfinished basements at a lesser home cost, and attain a mortgage that allows cash for improvements, a home renovation loan or line of credit secured on the home to finish the basement into a suite. Simply request to seek properties with walk-out basements or homes wherein a separate entrance could be developed easily.
Income from a basement apartment can help first-time buyers carry the costs of their home. But it’s not as simple as placing an online ad; homeowners must take due diligence to ensure their basement apartment is legal and that their tenants are trustworthy.
The legalities of basement apartments
If the apartment doesn’t comply with local zoning bylaws and fire codes, the apartment isn’t legal.
You need to check with the City of Saskatoon to see if your basement apartment is registered as a second unit. If it is, then it is legal and compliant with the fire code. If it’s not registered, then you have to conduct further research. A city’s zoning bylaw will tell you if your area permits a basement apartment.
If you want to apply for a new unit, you will need a building permit that satisfies the provisions of the fire code in your province.
When looking at a property, if the basement apartment is being advertised as a “nanny suite” or “in-law apartment,” be wary — this unit is most likely illegal. If a neighbour complains about your unit to the city and an inspection occurs, you will be required to pay to upgrade your unit to proper standards.
You must advise your insurance company if you intend to rent out your basement apartment. By not disclosing this information, it may refuse to pay a claim if, for example, a fire occurs later.
Finding a good tenant
You must be very careful when interviewing any potential tenant that you do not inadvertently violate any sections of the Human Rights Code by asking any inappropriate questions.
You are permitted to ask prospective tenants on a rental application if they smoke, whether they have pets and how many people will be living with them in the apartment. You can also ask for references and their rental history. You cannot ask about their ethnic background, religious or sexual preference, or marital status.
It’s important to conduct the proper research in advance before renting your basement to a residential tenant. Be sure to ask for a current pay stub from where they work and call previous landlords for references.
Basement apartments, if created and rented out properly, can give you peace of mind and additional income to assist you in carrying the costs of your home and increasing its long-term value.
Apply for a mortgage pre-approval and make use of the free and easy online mortgage calculator to formulate your budget and know what you truly can afford.