Thinking about buying an income property, or a home with adequate space for a rental suite? Great idea. Having an income property is a great way to relieve the burden of your mortgage, or make a little extra income from the unused space in your home. However, creating a rental suite it isn’t always as easy as it looks on TV! There are a few things to note before investing in a potential income property or jumping head first into a renovation.
The Preliminary Checklist
Firstly, the 4 necessities of a rental suite are a kitchen, bathroom, sleeping area and separate entrance. If it’s not turnkey ready, does the space you’re looking at have potential to host each of these key elements? Creating a separate entrance, for instance, can be quite costly. As most rental suites are in the basement where ceilings tend to be lower, it is also important to ensure that your ceilings are legal height (6’11”). As a general rule, try to keep your reno costs to less than 2 years rent. Is this attainable for your space? Once you have assessed the costs and confirmed that it is a realistic and worthwhile investment, you can make the decision as to whether to move forward with renovations if necessary.
Kitchen and Bathroom
These are the most important spaces to update as they have the highest return on investment. Unlike with resale and your own space, though, it’s not as important to spend a bundle on the frills here but more-so the fundamentals. It is definitely important to create a clean, modern and attractive space in order to collect a premium rent, but you don’t necessarily have to use all high-end finishes and fixtures. There is almost always a knockoff material or fixture that, if done tastefully, can look fabulous. (ex. Laminate that looks just like hardwood.) Just find a look that you like and try to recreate it with less costly materials where possible.
Focus on the Fundamentals
Don’t cut corners on the important stuff, like electrical, plumbing and insulation. You may fool a potential tenant initially by skipping a few steps, but you’ll inevitably have a high turnover rate which ends up being more work and hassle for you. Also, ensure that you have proper lighting. Especially in a basement, natural light can be limited. Illuminating the space properly will immediately make it more inviting.
DIY-ing Do’s and Don’ts
It’s okay to take on a few of the simpler tasks on your own to save a buck or two, such as painting, laying basic flooring like laminate tiling, or even assembling furniture and cabinetry. However, when it comes to electrical, plumbing, and the important stuff- hire a seasoned pro. It’s worth the investment to get the job done right the first time, rather than spending twice to have it fixed.
Consider the Added Benefit of Amenities
Having amenities such as an in-suite washer/dryer, a dishwasher and a parking spot can increase your monthly earnings significantly. Depending on location, a parking spot alone can add up to $150 to the monthly rental cost! Also, when it comes to utilities, offering a monthly flat rate allows you to charge up to $175/ on top of the monthly rate (depending on the size of the place and estimated monthly costs). When taking this route, be sure to install energy efficient bulbs and water saving devices in all lighting fixtures, toilets, faucets and shower heads. This will reduce monthly costs, and help you sleep better at night knowing you’ve been a little kinder to the environment. Also, energy efficient renovations are eligible for a variety of federal and provincial grants and rebates, which can make your rental project a lot more lucrative.
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