Provide long-term income and boost your home’s value with an income suite or rentable accessory dwelling unit.
Installing an independent housing unit at your property can be a big investment, but if planned well, an income suite (also known as an in-law suite or accessory dwelling unit), can be a terrific way to pay down a mortgage faster, build equity in a home, and increase its resale value. However, there are 10 important things to consider before installing an income suite in your home or property to ensure that you and your tenants have a positive experience.
Whether your plan is to have a long-term or short-term rental, being a landlord requires work and effort. Plus, a landlord’s duties often come at short notice or inconvenient times. Tasks can include screening potential tenants, performing regular maintenance work, handling repairs, and dealing with disputes or rental payment problems. Think about whether you are willing to put in the work yourself or if you might prefer to hire a property manager to care for your rental management duties.
Familiarize yourself with the laws governing residential tenants and landlords in your area. By knowing your rights and those of your tenant and understanding each person’s obligations, you can start the landlord-tenant relationship off on the right foot, avoid missteps, and have a plan in place for dealing with any potential disputes or legal issues.
Need a Lease Agreement?
A FREE account gets you access to over 200 free forms. Upgrade to a paid account (monthly, annually, or lifetime)
EZLandlord Forms Is Offering 15% 𝙊𝙛𝙛 For New Customers!
We cannot recommend these guys enough!
👉 State Specific Leases 👉 400 Forms to make your landlord-tenant relationship top notch 👉 200 FREE forms for those not ready to purchase 👉 4.8 Rating with over 5000 Reviews 👉 Pro Members get access to ALL leases and forms for $12 per month OR $75 if you purchase the annual membership 👉 YOU CAN BUY LIFETIME FORMS for $399
USE CODE 𝐒𝐓𝐀𝐂𝐈𝐄𝟏𝟓 to get 15% OFF ALL first-time purchases, EVEN THE LIFETIME FORMS!
Rental income can be a great way to increase your household revenue, but it’s not “free” money. The rent money you earn is subject to income tax. When you file your taxes, you can deduct from your rental income expenses incurred, such as repair costs, operating expenses, and utilities. You should also be aware that capital gains tax may apply if you sell your home, depending on how much rental income you earned while you owned it.
Installing an income suite in your home or property may mean giving up more than just extra living space. Having tenants may also mean giving up a portion of your privacy, storage space, and perhaps even some peace and quiet. Consider how having tenants within your property may affect your daily life, and make sure you can live with the inconveniences that may be involved.
Before drawing up plans, research your local zoning laws and building codes. Some municipalities do not allow for certain types of accessory dwelling units, and many have very specific requirements on what constitutes a legal suite.
Your local zoning office can supply you with your jurisdiction’s requirements on things like ceiling height, windows, fire safety, and emergency exits. Make sure you know what you can and can’t do before you apply for building permits.
Installing an income suite is a major project that can take a significant amount of time and money. Expect to spend anywhere from $40,000 up to $150,000 or more, depending on the size of the space, whether structural work is needed—such as digging out and underpinning a basement—and whether the suite is a standalone structure or within an existing home.
Resist the temptation to take shortcuts to contain costs. Protect yourself and your future tenants by including the time and money in your budget to do everything legally.
Many houses have utility access in the basement, which could be a problem if you’re planning on renting the space. If possible, try to place utilities such as the furnace, electrical panel, and water shutoff in a shared space outside of the rental unit so that maintenance tasks and emergency work can happen without having to coordinate access to the unit with the tenant.
While most building codes allow for a single furnace to heat an entire house with more than one dwelling unit, you might want to consider installing a separate HVAC system for each unit. Sharing air ducts will likely mean also sharing cooking smells, scents, dust, and noise. Plus, having one thermostat controlling both units may be problematic if you and your tenants have different preferences for temperature.
If contractors in your area tend to book up quickly, you may be tempted to find one before you get an architect to draw up the plans. But hiring an architect first is almost always the wisest course, as the money you spend upfront for an architect can be balanced out by bids from builders that are more accurate and easier to compare.
If you’re not interested in bidding out your project, consider working with a design-build firm. By hiring an architect and contractor at one firm, it may also help smooth the permit and inspection processes.
Not only do you want your rental unit to be up-to-code and above-board, but you also want it to be comfortable and a pleasure to live in. Long-term tenant
turnover zaps rental profit and adds heaps to your workload, so once you find quality tenants, it’s ideal when they stay a long time.
As you design your income suite, think about how you would use the space if you were living there. For example, if the kitchen area is limited, would you rather an 18-inch stove and 24-inch fridge, or vice versa? If you only had room for either a dishwasher or a laundry machine, which would you choose?
Article provided by Bob Villa. Written by Jahleen Turnbull-Sousa.
Did you enjoy this article?
This is an example of what is included on our FREE weekly newsletter, Landlord Weekly.
Subscribers get access to our free forms, email templates, and guides! As well as…
▪️Landlord Tips ▪️ Early Access to Our Blogs ▪️ Landlord Specific Articles by Other Industry Pro’s ▪️ Podcast Links
To check out a sample of our newsletter, click one of the links below👇
By Ryan Squires When setting the rental rate for a rental property or looking…
October 29, 2024Provided by Avail Knowing how to be a good landlord requires extensive knowledge of renting…
October 29, 2024