Is renting out your basement right for you? (what no one tells you!)
A basement apartment can be an incredible source of secondary income, but how do you know what it will really be like to be a landlord inside of your own home? You will have to consider privacy and noise, hidden expenses, and the mental shift from being a part of your family home to a business that you now run.
I’ve been there, and have first hand experience that I am going to share with you to help you understand if renting out your basement is right for you.
Yes, you will hear things! (how much is up to you)
There is no way around it, you will be sharing a structure with others if you decide to rent out your basement. But it does not have to be that bad. Yes, you will hear the occasional bumps and thumps, voices, and the TV or music playing here and there. All good things to know upfront so you aren’t surprised after the fact. And, in my experience, with some careful pre-planning, all of these issues can be extremely minor and barely an inconvenience.
First, noise transfer should be a key consideration for you when you are deciding on your construction method. Although there is no way to completely eliminate noise, you can absolutely reduce the noise with smart construction choices. When I built my first basement apartment, I was very deliberate to select a solution that was effective but did not totally blow my budget.
Safe n’ Sound + Resilient Channel bars can dramatically reduce noise transfer
To minimize sound transfer, I recommend the following combination:
Roxul Safe ‘n Sound insulation between the ceiling joists and any shared walls;
1/2” drywall throughout;
Resilient channel to reduce sound vibration transfer.
The next level would be double drywall and sound glue. I opted against as the cost escalates quickly and the above items will take care of 80% of the issue. The big question: does it work? Well, you will still hear things. There is no way around it. But it will be reduced DRAMATICALLY. Even when you decide to leave the property, it is a worthwhile investment that will keep future tenants happy.
What privacy?
Even after you’ve eliminated a lot of the noise transfer, there is no getting around the fact that someone else will be living on your property. Here’s my take: it is an adjustment, but one that I have always been 100% grateful for. At the end of the day, they are helping you build your financial dreams and for that, it is a blessing. With that said, I’d recommend a few things to give them and you as much privacy as possible:
A private outdoor space is a value add for a basement apartment, plus it gives them and you separation outside!
Provide good up/down blinds: so simple! These are really great for allowing daylight in while keeping a private space for the tenants downstairs, and also for you.
Contact your city / municipality to see if you can get extra garbage / recycling bins: this will go a long way to making sure that no one is being inconvenienced.
Build a private outdoor space for your basement tenants: this is a huge luxury that most basement rentals never provide, and will make your place highly desirable.
Get good tenants in the first place: this is a post for another time, but sticking to solid tenant evaluation criteria helps you make sure you have good people that you are sharing your property with!
The realities of being a landlord
We’ve all heard the horror stories. Everyone has heard of the 2am wake up calls to fix a toilet. The trouble in collecting rents. The calls to the locksmith. And so on. Here’s the deal - it’s your house, and you’ll want to make sure it is kept in good repair. Not to mention, you get to choose how you handle these sorts of requests. Here are a few examples:
Tenant says, “ I’m locked out.” You call the locksmith. 5 minutes. Or, drop what you’re doing and go help. Your choice.
Tenant says, “The toilet is not working.” Call a plumber. 5 minutes. Or, coordinate a time to inspect and see if you can do the repair. Your choice!
Tenant says, “The dishwasher is not working.” Call an appliance repair person. Again, 5 minutes. Or, go inspect at a time that works for you. Again, you can choose!
Bottom line - you can choose the level of involvement you have, and can make it work for you depending on your interest and level of expertise. Just because you live there does not mean you ever have to touch the toilet. You can even hire a property manager to handle the first call for you at a 5-12% charge of the rent. In any case, you should always be allocating part of the budget for repairs and maintenance to handle these things as they come up. For me, I’ve always enjoyed helping where I can, and when it exceeds my level of expertise or time, I am happy to call in an expert.
It’s now a business, not your home
Finally, here was the toughest shift for me personally when renting out a portion of my very own home. I had to learn - it was no longer my home, it was now a business. They may not keep it as clean as you once did. They won’t care to the minor maintenances as you would - that is your job. Two big considerations here:
Let go of thinking it is your house. It is now a business, full stop. You lease a space to people and it is up to them to decide how they will live in it (assuming they aren’t violating any lease terms, see below). So that first time you walk through, remember, it is not your home! It is your property, yes, but it may not be clean or tidy. They have their own lives going on, and their cleaning schedule may not align to your site visits or maintenance calls. They might not have taken the trash out. At the end of the day, you have no control over those things, so let it go!
Have a lease, and stick to the terms! Since you are neighbours with your tenants, you will likely build a relationship with them, and, you might even end up befriending your new tenants. However, it is still very important to have terms and stick to them. That might be the hardest thing to do, especially since most likely that late fee will make very little difference to your bottom line. Know when you’ll make exceptions, be flexible in extreme situations (ex. the pandemic), but be careful not to be taken advantage of. This applies not just to rent. Other terms, such as illegal activities have to be addressed and enforced quickly.
If you’ve come this far, it just might be a gold mine to financial freedom for you!
I strongly believe that a basement rental, or renting out any portion of your home, is the absolute best way to get your start into real estate investing. You can do it without having to purchase a separate property, you can make the conversion yourself or with trades, and it can be easier to finance should you need. Sure, there are some mindset shifts to be done, but once you have, I guarantee you will be oh so grateful for that monthly rent cheque that is helping you pay down a mortgage or even allowing you to live there completely free. And for that, I have learned that for me personally, are totally worth it and more. I’d happily have a tenant any day of the week if they are helping me build my financial independence.
What about you? Have you rented out a portion of your home? What adjustments were you not expecting? Would love to hear in the comments!