Author Topic: Rent out my basement?  (Read 27956 times)

aj_yooper

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Re: Rent out my basement?
« Reply #50 on: December 12, 2013, 11:06:18 AM »
Same here, but the trades workers make it look so easy! 

CommonCents

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Re: Rent out my basement?
« Reply #51 on: December 12, 2013, 11:24:59 AM »
Re feedback on the ads, lead with the best features.  Be glowing initially and only then share the downsides.

So for example, don't lead with "Shared, but not really."  Instead lead with "Private walkout basement apartment"

TrulyStashin

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Re: Rent out my basement?
« Reply #52 on: December 17, 2013, 07:41:09 AM »
Re feedback on the ads, lead with the best features.  Be glowing initially and only then share the downsides.

So for example, don't lead with "Shared, but not really."  Instead lead with "Private walkout basement apartment"

Thanks!  I changed them and added pictures.  (oops, need to post pics here too!)

I've only gotten one response.  Veteran LL's how long do you wait before dropping the price of your advertised rent?  I'm asking $995 now and am thinking to drop it to $950.  or $895.  Any tips on finding the sweet spot?

arebelspy

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Re: Rent out my basement?
« Reply #53 on: December 17, 2013, 09:07:30 AM »
I've only gotten one response.  Veteran LL's how long do you wait before dropping the price of your advertised rent?  I'm asking $995 now and am thinking to drop it to $950.  or $895.  Any tips on finding the sweet spot?

Depends on the market.  If you've been marketing it several weeks though and have only one response, you're probably above market, and should consider dropping it.

The more people interested, the more choices you have to choose a good tenant.
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SunshineGirl

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Re: Rent out my basement?
« Reply #54 on: December 17, 2013, 11:16:22 AM »
I think it's too soon to drop the price. Based on what you've reported, it's not priced too high. Just keep re-running the ad on CL and the military site - maybe offer a discount to military.

Two things:
-- I disagree that tenants don't factor in utilities. I'm sure some don't, but plenty do, and it's quite nice for a tenant not to have to worry about setting them up himself.
-- I have properties where the water bill and trash bill comes in one bill for multiple units. For ease, I charge a per-unit amount and their leases say this could be raised based on actual usage. For instance, there is a line in the lease which states rent = $525 and water/trash = $25, subject to actual usage. So far, we haven't had to go back and raise it, but we could if we need to.

Also, have you thought about renting it on Air BNB for short-term situations? That could be a backup plan, but I wouldn't worry about not having rented it yet - it's only been on the market a short time and December is a weird time for rentals, with the holidays and all.


TrulyStashin

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Re: Rent out my basement?
« Reply #55 on: December 17, 2013, 11:46:50 AM »
I think it's too soon to drop the price. Based on what you've reported, it's not priced too high. Just keep re-running the ad on CL and the military site - maybe offer a discount to military.

Two things:
-- I disagree that tenants don't factor in utilities. I'm sure some don't, but plenty do, and it's quite nice for a tenant not to have to worry about setting them up himself.
-- I have properties where the water bill and trash bill comes in one bill for multiple units. For ease, I charge a per-unit amount and their leases say this could be raised based on actual usage. For instance, there is a line in the lease which states rent = $525 and water/trash = $25, subject to actual usage. So far, we haven't had to go back and raise it, but we could if we need to.

Also, have you thought about renting it on Air BNB for short-term situations? That could be a backup plan, but I wouldn't worry about not having rented it yet - it's only been on the market a short time and December is a weird time for rentals, with the holidays and all.

Thanks!  Love the idea about putting the utilities in a line item (with total cost set at $995/ mo) and adding "subject to actual usage......"  Perfect.

I think you're right that it's too soon to drop it.  I'm getting anxious, is all.  I need to manage the emotions of this next phase, rather than change my policies.  Yet.  I appreciate your point about December being a weird time for finding tenants.  No one wants to move during the holidays and it has only be advertised for a week.

I need to re-set my expectations toward having a roommate as of late Jan. / February and focus on finishing the punch list and enjoying the beautiful space while I can.  I also keep telling myself that 1) even if I don't find a roommate AT ALL, I'll still be ok (financially speaking), though will not get the ROI I hoped for; and 2) I'm bound to find someone at some point.  It will be ok.

arebelspy

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Re: Rent out my basement?
« Reply #56 on: December 17, 2013, 12:11:09 PM »
Vacancy (and subsequent turnover costs) is the #1 silent killer of cash flow.

If you drop it from 995 to 950, and get it rented now, you lose the extra $45/mo for the next year (based on the lower rent) = $540 less than you would have if you rented it today at 995.

If it's vacant for an extra month (January), you lose a month of rent ($950).

You'll end up with more money in your pocket renting it for $950 today than you will for $995 a month from now, and have more of a selection of tenants to pick a good one.

It's your call, and, like I said, it depends on your market.  But don't be afraid to get aggressive with price drops.
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TrulyStashin

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Re: Rent out my basement?
« Reply #57 on: December 19, 2013, 08:05:12 AM »
Vacancy (and subsequent turnover costs) is the #1 silent killer of cash flow.

If you drop it from 995 to 950, and get it rented now, you lose the extra $45/mo for the next year (based on the lower rent) = $540 less than you would have if you rented it today at 995.

If it's vacant for an extra month (January), you lose a month of rent ($950).

You'll end up with more money in your pocket renting it for $950 today than you will for $995 a month from now, and have more of a selection of tenants to pick a good one.

It's your call, and, like I said, it depends on your market.  But don't be afraid to get aggressive with price drops.

This is what I've been thinking too.  Though I'd love to get $995, my gut sense is that $895 is the sweet spot.  That's a bigger drop that I'd first contemplated, but anything over $900 just feels too high for my market, unless I can offer a pool or gym or some other apartment-community-type amenity.

All three ads are now at $895.  I'm going to focus on the punch list now.  Mom and Dad are coming for Christmas and they're going to help.  ;)

Nate R

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Re: Rent out my basement?
« Reply #58 on: December 19, 2013, 09:02:26 AM »
Curious if you had to deal w/ zoning on this, or are doing it quietly and not worrying about that? I know in my area, the lot zoning would have to be appropriate to have 2 units instead of one.

FWIW, I we live in the upper of a 2/2 duplex, and I've considered finishing 1/2 of the basement down the road  w/ proper egress to be able to rent the lower as a 3 BR, so it's been interesting to watch your project. (Basement access is through 2 separate stairways, one for each unit, so it would be straightforward to keep their half of the basement completely seperate)

TrulyStashin

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Re: Rent out my basement?
« Reply #59 on: December 19, 2013, 11:58:12 AM »
Under my zoning, I can have a "roommate" with no special use permit or other exemption.  To be a "two-family", however, I'd need a special use permit. 

Technically, under scrutiny, the county may find that I've created a two-family (though if I merely remove the stove, then it wouldn't be a two-family -- it's that close).  I don't think it will ever be scrutinized, however, given my short timeframe (18 mos.) left in the home and the unobtrusive nature of having one more person coming and going and parking in my driveway.  I won't do anything that would disrupt my neighbors.  In early to mid-2015, I'm moving to the city and will rent the whole house as a SF rental.  If I intended to rent it as a duplex, I'd have pursued the SUP. 

I think this is a judgment call for you, based largely on whether you'd like to market/ sell the property as a three-family or intend to stay there for a long time.

Nate R

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Re: Rent out my basement?
« Reply #60 on: December 20, 2013, 08:41:54 AM »
Under my zoning, I can have a "roommate" with no special use permit or other exemption.  To be a "two-family", however, I'd need a special use permit. 

Technically, under scrutiny, the county may find that I've created a two-family (though if I merely remove the stove, then it wouldn't be a two-family -- it's that close).  I don't think it will ever be scrutinized, however, given my short timeframe (18 mos.) left in the home and the unobtrusive nature of having one more person coming and going and parking in my driveway.  I won't do anything that would disrupt my neighbors.  In early to mid-2015, I'm moving to the city and will rent the whole house as a SF rental.  If I intended to rent it as a duplex, I'd have pursued the SUP. 

I think this is a judgment call for you, based largely on whether you'd like to market/ sell the property as a three-family or intend to stay there for a long time.

Thanks, makes sense, esepecially if no stove makes it completely OK! :-) I like that!

I should've been more clear, my thought is to add a basement bedroom to the 1st floor unit to make it a 3 BR unit, not add a complete 3rd unit, so no zoning issues there. (I think my property is zoned for 1 or 2 units, not 3+ IIRC.) But of course I'd have to add egress, just as you had to.

_JT

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Re: Rent out my basement?
« Reply #61 on: December 21, 2013, 09:45:59 PM »
A surprising number of locales (surprising to me, at least) allow accessory dwellings to be built without re-zoning.

TrulyStashin

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Re: Rent out my basement?
« Reply #62 on: January 10, 2014, 07:31:45 AM »
I have a tenant/ roommate!!!

She's a 34 y.o. single HS teacher.  Good credit.  Great references.  I called her landlord from three years ago (not current landlord) and the reaction I got was "Oh, she's great!  Tell her we miss her."

Rent is $920/ mo.  Security deposit is $920 + $200 for her cats.    12 month lease.  She's moving in sometime after the 15th.

Hurray!!!

arebelspy

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Re: Rent out my basement?
« Reply #63 on: January 10, 2014, 07:35:03 AM »
I have a tenant/ roommate!!!

She's a 34 y.o. single HS teacher.  Good credit.  Great references.  I called her landlord from three years ago (not current landlord) and the reaction I got was "Oh, she's great!  Tell her we miss her."

Rent is $920/ mo.  Security deposit is $920 + $200 for her cats.    12 month lease.  She's moving in sometime after the 15th.

Hurray!!!

Congrats!  Good job dropping the price, but getting a better tenant.  You won't regret that when the rent comes in reliably every month.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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TrulyStashin

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Re: Rent out my basement?
« Reply #64 on: January 15, 2014, 10:35:47 AM »
The numbers are almost final and thought I'm shocked at how much more it cost than even my second estimate projected, I think it was still a good decision.  As the project unfolded, a number of hidden and latent issues with my house came to light.  For instance, I ended up having to completely replace and re-wire the main electrical panel, which my amazing BF did with oversight by a Journeyman electrician-friend of ours.  That was an ridiculous amount of work and it left me humbled and deeply grateful for BF's help.  It also left me resolved to spend more $ on tradesmen.

You might call it complainypants, and with due respect to MMM, quite simply there are limits to our endurance.  I was not willing to save money but lose a good man whom I love!  Plus, having a roommate in by January would not have happened without hiring tradesmen to move the project along.  Had we gone 100% DIY, it likely would be several more months before it would be ready and at $930.00/ month, the tradesmen pay for themselves very quickly.

Essentially, this project was the equivalent of a whole house renovation -- new mechanicals (stove, water heater); new electrical (new panel box, new 100 AMP subpanel); new plumbing (LOTS of plumbing - much of my home's old plumbing was undersized, e.g. 1/2" supply line from water heater; drywall; tile; framing/ carpentry; masonry; finish work; flooring; new countertop finish).  It's as if I had bought a 1,500 sq foot SFH rental with 1963-era systems.

There's still a little left to do, but here's how it breaks down (not  by construction sector but by method of payment):

Cash out of pocket -- $9327.34
Lowe's (6 mos. same as cash) -- $2033.40
Home Depot (12 mos. same as cash) -- $1592.07
Flooring store (6 mos. same as cash) - $3,080.00

Total --  $16032.81

What's amazing is that prior to my Mustachian-180 which started in May 2013, there is no way in hell that I could have come up with over $9k in cash over a three month period of time.  Not a chance.  I'm very proud of myself for being able to do that. 

I'm not wild about having $6,705.47 in new debt, but objectively speaking this is good debt.  It will all be paid off by July of this year (though I may let the Home Depot bill stretch out until the 12 mos is up and use cash flow to pay down other debts).

My total ROI will take 17 months, after which time I expect to have a profit of about $8k to 10k annually which is the equivalent of giving myself a 10% raise.

My tenant/ roommate moves in on Saturday.  I've got her signed 12 month lease and her $1120 security and pet deposits.  As I prepared for her move in, I renegotiated my bills with Comcast (internet) and the trash company.  That resulted in an additional annual savings of about $220.00.  Nice.

I'll get the pictures together ASAP and post a link.


JPinDC

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Re: Rent out my basement?
« Reply #65 on: January 15, 2014, 10:44:23 AM »
Congratulations! I've been following along with your reno and am so glad to see it had a happy ending!

aj_yooper

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Re: Rent out my basement?
« Reply #66 on: January 15, 2014, 10:44:41 AM »
Your hard work has paid off!  No more early before work and after work late hours for you.

smalllife

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Re: Rent out my basement?
« Reply #67 on: January 15, 2014, 10:46:58 AM »
Woo hoo!!!!

_JT

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Re: Rent out my basement?
« Reply #68 on: January 15, 2014, 10:52:19 AM »
The other bonus to hiring tradespeople for work on an investment property (can't remember now if this is a permitted ADU or not) is that their labor is tax deductible, where yours is not.

Peony

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Re: Rent out my basement?
« Reply #69 on: January 15, 2014, 01:07:08 PM »
You are going to be so glad you did this.

TrulyStashin

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Re: Rent out my basement?
« Reply #70 on: January 15, 2014, 02:22:58 PM »
One clarification . . . my BF, a tech genius, figured out how to make a second user account in my wifi system.  So, I offered Roommate the option of adding $10 to the rent to cover adding her to my wifi.  She agreed so her rent is $930.

Then I called Comcast to ask about bumping my internet from Economy ($39.95) to Performance.  The Economy connection is already balky.  Adding another use will make it worse.  Comcast initially quoted me $65.00 a month for Performance.  I said "Holy smokes, that's expensive!"  The rep responded by hooking me up with Performance level for $29.95/ mo. for 12 months.

So, my net gain on the wi fi is $20/ mo!   Love that.

hybrid

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Re: Rent out my basement?
« Reply #71 on: January 17, 2014, 07:24:44 AM »
Well done!  Now I want to get Comcast Internet for $30 a month as well....

fodder69

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Re: Rent out my basement?
« Reply #72 on: January 17, 2014, 07:47:11 AM »
Glad to see an end to this part of your story! Congratulations!

Mori

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Re: Rent out my basement?
« Reply #73 on: January 17, 2014, 11:29:12 AM »
Congrats! Thanks for posting and letting us follow along!

Edited to add:

I forgot to ask--any pics you'd like to share of the finished product? I know the ad was up earlier in the thread, but I don't see it now. Just wondering how fancy you went on the finishing/staging.
« Last Edit: January 17, 2014, 11:35:40 AM by Mori »

TrulyStashin

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Re: Rent out my basement?
« Reply #74 on: January 17, 2014, 01:07:42 PM »
Congrats! Thanks for posting and letting us follow along!

Edited to add:

I forgot to ask--any pics you'd like to share of the finished product? I know the ad was up earlier in the thread, but I don't see it now. Just wondering how fancy you went on the finishing/staging.

I'll post a link to before and after pics ASAP.  I've been slammed busy at work and finishing up last minute stuff on this reno.  No time to organize the photos, but I can't wait to do it.

Everyone who walks into the space is blown away at the transformation.  I'm not sure if that means it was REALLY bad before or what, but... it's beautiful now.  My family is teasing me that the basement is nicer than the main level!  They're right.