Just wondering what is better renting out a single family home for $1050 or turning it in two a two unit and possibly getting $1400 to $1600. You have the cost of conversion plus the resale could be less or less appealing to most buyers as it is a single family home area.
The basement is a walkout I would put in a seperate meter and seperate driveway as well.
Anyone know the questions and numbers I should be looking at/asking.
What part of the country is the property located ? Do you have other rentals or is this your first? What are your goals? How many bed rooms per unit? Have you compared rents? I personally don't like single family homes. The more units under one roof the more money generated. You need to get an estimate as to the cost of constructing the basement unit & run your numbers.
It would likely become a permanent rental property meaning the value would be based primarily on rental income. Possibly of reduced value in a non rental neighbourhood.
If it is in an area that does not already have basement conversions I would not add a basement unit. You would likely not be popular with the neighbours.
Keep in mind you also will need planning approval.
In Calgary taking an unfinished basement and suiting it is going to cost about $30,000 and give you an extra $900/month so the ROI is about 3.5 years. Not bad but not great either.
Some of the risks:
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[*] Putting in a suite that isn't zoned correctly in Calgary raises a lot of flags and you have a good chance of getting it shut down. Neighbours see the suite going in and say "not in my back yard!" I own a few illigels but all of them were existing and I got letters from the sellers saying that they didn't have any inquires from the city.
[*]You will have higher turn over with basement suites. Again I think that this is still worth the added management costs but just be aware of it. Tenants will stay about a year on average.
Value. There is no question that selling a home with a suite in it is harder. You are looking for investors or people that really can't afford the home and need the income to help. All of my suites can easily be turned back into regular basements without much trouble.
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So check with your local government and talk with the neighbours before you do anything!! Then consider if placing that capital into another income property might be more effective.
[quote user=dplummer]What part of the country is the property located ? Do you have other rentals or is this your first? What are your goals? How many bed rooms per unit? Have you compared rents? I personally don't like single family homes. The more units under one roof the more money generated. You need to get an estimate as to the cost of constructing the basement unit & run your numbers.
Doug
I'm in a rural area outside of Fredericton NB. I have 8 doors over 5 building on 4 PID's . My goal is to replace my current income. Thanks for the questions I will be working on the quotes this spring.
[quote user=wgraham]In Calgary taking an unfinished basement and suiting it is going to cost about $30,000 and give you an extra $900/month so the ROI is about 3.5 years. Not bad but not great either.
Some of the risks:
[list type=decimal]
[*] Putting in a suite that isn't zoned correctly in Calgary raises a lot of flags and you have a good chance of getting it shut down. Neighbours see the suite going in and say "not in my back yard!" I own a few illigels but all of them were existing and I got letters from the sellers saying that they didn't have any inquires from the city.
[*]You will have higher turn over with basement suites. Again I think that this is still worth the added management costs but just be aware of it. Tenants will stay about a year on average.
Value. There is no question that selling a home with a suite in it is harder. You are looking for investors or people that really can't afford the home and need the income to help. All of my suites can easily be turned back into regular basements without much trouble.
[/list type=decimal]
So check with your local government and talk with the neighbours before you do anything!! Then consider if placing that capital into another income property might be more effective.
Thanks for the perspective. Zoning will mose likely not be a problem neither will the neighbours we are all on one acre lots with lots of privacy.
Something else to keep in mind is that cellar dwellers are generally lower quality tenants. This translates into more difficult to manage, more late payments and non payments as well as a higher likelihood of issues interacting with upstairs tenants.
In Ontario it generally means lower income single males and those on government assistance. These are generally difficult tenant groups to manage and difficult to garnish wages through small claims court.
That would of course be an excellent return however I can think of no situation that a basement apartment could ever produce a positive cash flow of $900 per month taking into consideration all expenses and debt repayment. Numbers like that are only possible on TV.
Basement units are capable of producing good numbers but do, as I have noted above, fall pray to less than desirable tenants substantially increasing operating costs.
Many a novice LL has sworn off ever renting again after their first experience with renting out a basement apartment. Particularly in cities like Toronto.
You should use the whole 30k of your HELOC as cash in your valuation. It's very liquid debt which is why I look at it this way.
In the city basement suites rent very quickly and you generally get a large number of applicants from which to pick a good tenant. I don't mind them at all.
Since it sounds like you're rural I get a little antsy about it - most people that want to live outside the city want more space.
More detailed information is required from you - cost of conversion, extra operating costs, expected impact on vacancy / collections, change in resale value - to provide a meaningful answer....
Get the info posted in detail and I'll be happy to help!
[quote user=housingrental]More detailed information is required from you - cost of conversion, extra operating costs, expected impact on vacancy / collections, change in resale value - to provide a meaningful answer....
Get the info posted in detail and I'll be happy to help!
Thanks Adam, once I have all the info collected I will post and go from there.
. My goal is to replace my current income. Thanks for the questions I will be working on the quotes this spring. 
