Dear David,
After several years of living in our basement, our adult son has decided to move out on his own. Should we turn our basement into a rental unit to generate some extra income? We are a decade or so away from retirement, so want to start planning ahead. – EMPTY NESTERS
DEAR EMPTY NESTERS: Generating some income from your empty basement is an option worth investigating. Your first step should be to make sure the project you have in mind complies with your existing zoning and with what is permitted in your neighbourhood.
It’s fine to get the ball rolling with an online search and a couple of phone calls, but in all likelihood, you’ll need to visit your local zoning department in person. Staff will consider what’s allowed under current bylaws before giving you a definitive answer about whether you can go ahead or not. They’ll also look at whether your property has adequate parking, since your outside space is pretty much set, no matter what you do inside the house. With much of the country facing a housing shortage, there may be some good news ahead. Zoning regulations have loosened up a bit and there’s a chance your property may comply in some areas where it may not have previously.
Once you can confirm that your project falls within zoning allowances, it’s time to get a quote from a contractor. Doing the math is often what will help you decide whether this is a project worth pursuing. As an example, a quick calculation may indicate that a $100 thousand renovation with six percent interest would cost you approximately $500 per month to carry. By current market standards, even a modest one-bedroom apartment will rent for much more than this.
Something else to consider before you move ahead with your plans is the Residential Tenancies Act. Many people don’t realize the rights a tenant has when they move into your house, and many homeowners aren’t well suited to be landlords. Before you take on a tenant, consider whether positioning your basement as an AirBNB or executive rental might be a better fit for you. These shorter-term options are not affected by the Residential Tenancies Act, and if your adult son decides to return to the nest at some point in the future, you can simply stop booking rental guests instead of evicting a tenant.
PRO TIP: Even though your retirement is still some time away, you’re wise to consider this option as a way to enhance your retirement savings. Rather than spending your rental income on entertainment, use the funds to top up your RRSP, or explore a tax-free savings account. The basement rental scenario could be a great option for you, but go in with your eyes wide open. Tenants aren’t like your children: you can’t solve problems by yelling down the stairs or withholding the keys to the family car. This is a much different obligation, and you need to weigh your options before jumping in. #Advice #AskDavid #TheNegotiator
