The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: IamDavin on August 26, 2015, 07:41:04 PM
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Just curious if anyone has any info on the pros and cons of having a owner occupied single family home that has a seperate basement with its own private entrance.. and renting the basement out.
I have a friend that knows someone that is doing this same thing.. but he wasn't too sure on the details. Are any of you doing this?
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I'm doing this. I have a separate 2BR basement apartment that I've rented out since I bought my house 3 years ago. I also have a roommate who rents a room in the main part of the house (shared with me). We all share yard, deck, and laundry. It's worked out really well, but I know I've also gotten lucky having really good tenants.
There are definitely some inconveniences associated with sharing your personal space with tenants and some awkwardness of the friends v. LL/T relationship, but all in all it's worth it. Whenever I start to complain to myself or think about how it would be nice to have more space of my own for storage and/or guests, the monthly checks come in and I know I am on the right track.
I am going to switch things up this fall and furnish the apartment as a short-term rental (I live very close to several hospitals so it's ideal for travel nurses coming through on 3-4 month assignments) and see how that goes. My plan is to keep renting it at least until I have the mortgage paid off, and then reevaluate from there.
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I do this too. I've had a couple negative experiences with tenants, but nothing horrible. For the last few years I've had a really good tenant who is also a friend and it's been generally problem free. Would recommend, but be picky about who you rent to.
Pros:
Someone else pays the mortgage.
I live alone, so it's nice to know someone I trust is watching over my house if I'm away for awhile In my case they also have a key to my suite and can water the plants, let the dog out to pee, check the mail, etc. This may not be a pro if you don't trust your tenants.
More tax deductions for stuff you do on the house.
Cons:
Little extra noise sometimes.
Less space.
You have to fix things if they break.
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This kind of setup is really common where I live. In fact, most newer homes are built with income suites (because housing is so expensive here it's the only way many can afford it). The suites get used a rentals, or the home becomes a multi-generational home with different branches of the family living in the 2 sections. A house with a good suite is basically a duplex, something that even MMM agrees is a good thing.
We've done both setups. When we first moved in we rented the suite. Now MIL lives in the suite. The big pro is obviously more cash in your pocket. I also like that the house is occupied nearly 24hs/day. Cons are increased noise, we need to be conscious of not making too much noise ourselves, increased wear and tear on the house, harder to keep utility bills down (offset by rental income), risk of getting a bad tenant.
We are much pickier about who we rent to than we'd be if the rental weren't in our basement, especially since we have 2 kids.
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Thanks for the replies everyone.
My main concerns at this point is how are LL / T laws handled when you're in a single family home that isn't zoned multi-family? If the tenant doesn't pay and I need to evict them... will I run into issues?
I'm digging through my counties zoning laws right now, but haven't found anything yet.
Assuming I would need to notify them in some way that I have a renter in the property and get some sort of permit?
How do you guys handle the legal side of things?
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I wouldn't want to do anything that wasn't permitted by zoning.
If you are not above board and not following the rules it could be hard to evict if things go bad.
You may be able to do more of a roomate agreement. Have a clear eviction clause that follows your area rules. Is. Notice to evict will be given on the 2nd of the month. Tenant must leave by 20th if rent is not paid in full. (Actually give the eviction notice, have them pre printed. Tell them it is just business policy and nothing to worry about since you are sure they will have the full payment soon.)
Then add a bit of your own rules that you both agree with like: The roomate may be asked to leave without cause provided at least 2 months notice is given. (You might get sick of the arrangement and need an easy out). The roomate may leave on their own if at least 1 month notice is given. (They might get sick of the arrangement and should have an easier out.)
Maybe try to start with someone you know will be short term. I took a roomate one November knowing she would be gone in May. Situations changed & I didn't need a roomate after May.
You will also need to notify your insurance as the liability risk goes up.
If you do rent out a portion of your home, keep track of everything. You should be able to deduct a % of all expenses. By doing this your net income for tax purposes should be quite low.
Welcome to the landlord world
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I wouldn't want to do anything that wasn't permitted by Find private landlords online (http://letzoo.co.uk/private-landlord-properties-harrow.php). If you are not above board and not following the rules it could be hard to evict if things go bad.
You may be able to do more of a roommate agreement. Have a clear eviction clause that follows your area rules. Is. Notice to evict will be given on the 2nd of the month. Tenant must leave by 20th if rent is not paid in full. (Actually give the eviction notice, have them pre printed. Tell them it is just business policy and nothing to worry about since you are sure they will have the full payment soon.)
Then add a bit of your own rules that you both agree with like: The roomate may be asked to leave without cause provided at least 2 months notice is given. (You might get sick of the arrangement and need an easy out). The roomate may leave on their own if at least 1 month notice is given. (They might get sick of the arrangement and should have an easier out.)
Maybe try to start with someone you know will be short term. I took a roomate one November knowing she would be gone in May. Situations changed & I didn't need a roomate after May.
You will also need to notify your insurance as the liability risk goes up.
If you do rent out a portion of your home, keep track of everything. You should be able to deduct a % of all expenses. By doing this your net income for tax purposes should be quite low.
Welcome to the landlord world
Hello,
I Need an assistance for my house rent agreement, does Anyone suggest me how can I find an assistant for house rent agreement??
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We live in one of these, but we're in Norway, so rules will be very different.
Here, this is a very common way to earn a little extra for the owners, as an apartment in the same house they live in themselves is not taxed by the state (unless the apartment is bigger, which is almost never an issue). We have our own electric system which is paid separate, but they could not justify the cost of separating the water and the built-in heating, so that is baked into our rent.
Pros:
- Great if you get along with the owners/tenants.
- The owners are often close by if something happens, like a leak or a faulty switch.
- Increased likelihood of someone being home if something happens and can take action quickly, like water damage.
- They have a vested interest in keeping the building well maintained.
Cons:
- If things get sour, you are living pretty close to each other.
- Think about your noise tolerance. Our home owners have three young boys, but this is not an issue to us because our bedroom is under the garage and their trampoline is at the other end of the yard. For owners, it can be similarly jarring to be used to peace and quiet and suddenly get tenants who listens to loud music. A great contract can help set some healthy boundaries on this.
- At least in my country, the apartment has to be physically separate from the rest of the house and approved and registered as suitable living quarters by the council.
I've also lived as a roommate with a friend and her children for a few years. We knew each other well already so there were never any issues, but in a situation like that, you live much closer together, so I'd vet potential applicants even closer if that was the case.