# What is your netincome from renting your basement ?



## inverstmentmentjinja (Nov 25, 2013)

I have unfinished basement , and the cost of finishing it around 20K , the rent will be around 700 CAD, it seem the overhead and the hassle of renting and the privacy issue of being some one living under your rooms over weight the net income that will come from this rent, at best the remaining will be 350 , beside the basement will not be legally registered which add another pain and worry . 

have any body experience with basement rental ? do you recommend it ?


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## Just a Guy (Mar 27, 2012)

Judging by the tenants I've had in the past, I'd never rent a suite in my house...that goes double, no infinitely more if I had kids.

If the suite isn't legal, you can have even more expensive nightmares...paying to relocate tenants, paying to remove the suite, fines, etc...and ironically it can be because your tenant registers a complaint...

Also, technically, half your place may not qualify for the tax free capital gains...especially since you need to declare income and you'll want to deduct expenses. 

I'd only recommend buying a separate property to use as rentals. If you try to cut corners you're going to get burned.


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## Chris L (Nov 16, 2011)

How old are you? Are you married, dating? Do you have kids?

Simple advice. Do it while young, dating, newly married and stop when you have kids or are old.

Then again at empty nest if you need cash and divorced.

It's a lifestyle question and a cashflow requirement one.

Young can deal with more pain and headaches and require less space. Try keeping your unit quiet with kids running around upstairs. You need the backyard and space with kids. 

But in the long run, tough it out as much as possible while you can. It's nothing something you want to be doing your entire life.


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## MoreMiles (Apr 20, 2011)

If you have a teenage daughter.. would you trust a single man renting your basement? There is only a small unlockable door between your daughter and that tenant.

These days, even your child is male or young, the risk is not lower. There are just so many weirdos out there that no amount of rent can justify that risk.


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## wendi1 (Oct 2, 2013)

If you get the basement finished as a rental suite, according to code, there will be a firestop door with a lock between the tenant and yourself. I would not cut corners on this.

If you know you are finishing a basement as a rental (instead of for your own use), I would invest in the extra insulation between the floors, smoke and carbon monoxide detectors, make sure there are separate hydro, gas and water meters, and make it nice to attract a quality tenant. Make it legal, in other words.

My favorite rentals were triplexes where the landlord lived on site - he/she was there to fix issues. But this is not an easy passive income stream, you have to do your homework, and know your obligations and rights.


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## Chris L (Nov 16, 2011)

MoreMiles said:


> If you have a teenage daughter.. would you trust a single man renting your basement? There is only a small unlockable door between your daughter and that tenant.
> 
> These days, even your child is male or young, the risk is not lower. There are just so many weirdos out there that no amount of rent can justify that risk.


Misandric and sexist all in one shot. I'm more scared of what your teenage daughter might do to my single male tenant through false allegations. So you might want to park that B.S. argument someplace else.

You got a front door in your house without male tenants? You got single males around your hood? Be frightened of the penis. Blah.


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## Jon_Snow (May 20, 2009)

Just my opinion here, and not specifically referring to the OP - but if the only way you can afford a house is by having some stranger living beneath you, then you probably CAN'T afford a house.

The basement rental dweller phenomenon has always creeped me out.


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## inverstmentmentjinja (Nov 25, 2013)

> Misandric and sexist all in one shot


Bravoo 

@MoreMiles: Do you know in the latest statistic in Vancouver 70% of adults who have sex with under age was women ? 
this forum was the only Canadian place that I have not to force my self to watch or read insults materials designed to men and how they are pigs, especially these commercials that show men as stupid idiots.


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## inverstmentmentjinja (Nov 25, 2013)

So as expected bad experience from every body , I think that 300$ will get it (or save it ) from other sources and will keep me from that hassle , 
and Yes I am single and young .


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## MoreMiles (Apr 20, 2011)

inverstmentmentjinja said:


> So as expected bad experience from every body , I think that 300$ will get it (or save it ) from other sources and will keep me from that hassle ,
> and Yes I am single and young .


Single and young? Just wait until you have a daughter one day. As much as you refuse to accept, that is the norm of society. Have you asked yourself why are all daycare and preschool teachers female? Why is there a need to separate washroom sexes? To say that it's ridiculous to worry about abuse is the type of view why molested children are afraid to speak up, like from their priests or people in position of power. Many people will tell them that they are making false accusations. If you choose to believe your tenant, go ahead. I choose to believe my children first. It's a very biased view but that is my family view.


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## Chris L (Nov 16, 2011)

MoreMiles said:


> Single and young? Just wait until you have a daughter one day. As much as you refuse to accept, that is the norm of society. Have you asked yourself why are all daycare and preschool teachers female? Why is there a need to separate washroom sexes? To say that it's ridiculous to worry about abuse is the type of view why molested children are afraid to speak up, like from their priests or people in position of power. Many people will tell them that they are making false accusations. If you choose to believe your tenant, go ahead. I choose to believe my children first. It's a very biased view but that is my family view.


Married with kids. 

You watch too much tv. Fear the babysitter and teacher with your kids before you fear random male tenants. Such misinformation. These people choose occupations for the easy pickings. And women have been shown to be the primary abusers of children.

Now, let's get back to RE.

To the OP, I have have tenants for over 10 years in our lower unit. With every year I choose better tenants. My best are single men, btw. They are easy going and easy to please. I won't get into single women because this is a financial forum.

We've done it and I would recommend it as a 5-10 year strategy and if you have thick skin and don't take things personally. But we've done well for having done it. It helped us pay off our house in that time frame by doubling and tripling up payments.


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## Causalien (Apr 4, 2009)

inverstmentmentjinja said:


> So as expected bad experience from every body , I think that 300$ will get it (or save it ) from other sources and will keep me from that hassle ,
> and Yes I am single and young .


You need to get info from people in similar situations. I am single and young... er older than you probably. But without a family to worry about. It's great. Trains you to deal with people, the law. Forces you to establish connections with accountants and lawyers, handyman etc. I recommend establishing clear paper trails for renter/landlord relationship. Just like the family man fears the pedophile basement dweller, I fear the death by accidental common law clause. 

Incidently, you might find me in one of the basement dwelling places. As weird as it sound since I actually own my own place, I really enjoy moving around. I am actually the best kind of basement dweller you can find. For starters, I recommend Japanese man/woman. They've been, and has never failed being, the best type of tenants possible.

$700 sounds a bit low on a basement suite. I guess it depends on how big it is. But you are looking at recouping the loss in about 3 years. Is that what you are expecting?


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## peterk (May 16, 2010)

Causalien said:


> I fear the death by accidental common law clause.


Good point. I bet the odds are a hell of a lot higher than that of the married man's daughter being violated by an evil penis weilding creature living in his basement (doing all sorts of perverted male activies, no doubt)

Something for single folks to consider when selecting potential renters or roomates...


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## Just a Guy (Mar 27, 2012)

Funny how most have jumped on the pedophile bandwagon...tenants have a lot of other bad influences that they bring drugs, alcohol, mess, morals, arguments, etc...all things I don't want brought into my home. I don't think I've ever had a pedophile as a tenant...prostitures, drug addicts, thieves, domestic abuse for sure...but I can't say a pedophile.

All that being said, I love owning real estate...in 2013 I picked up 5 new doors alone (a bachelor, 2 one bedrooms, 2 two bedrooms). Total cost 300k, Total cost out of pocket $0 (100% financed), total rent $4600/month, monthly expenses (mortgages, insurance, taxes, condo fees) just over half. You don't get returns like that anywhere else.


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## Chris L (Nov 16, 2011)

Just a Guy said:


> All that being said, I love owning real estate...in 2013 I picked up 5 new doors alone (a bachelor, 2 one bedrooms, 2 two bedrooms). Total cost 300k, Total cost out of pocket $0 (100% financed), total rent $4600/month, monthly expenses (mortgages, insurance, taxes, condo fees) just over half. You don't get returns like that anywhere else.


Where?

And to the point, you evaluate tenants on a case by case basis, not on sex alone. I've had all sorts, but mostly good, though flawed, like all people.


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## Causalien (Apr 4, 2009)

Chris L said:


> Where?
> 
> And to the point, you evaluate tenants on a case by case basis, not on sex alone. I've had all sorts, but mostly good, though flawed, like all people.


If my RE sense is correct. This is probably in Windsor or maybe Winnipeg. Winnipeg might have gone off the map now cause last I remembered a condo cost 300k.


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## Just a Guy (Mar 27, 2012)

Western Canada. Though I also like the look of eastern Canada. Places like this are in short supply, so I don't really need more competition. Most were foreclosures or estate sales, needed some minor work (paint and floors), but the appraisals came in high enough to cover the renos and the required down payment (so, if it cost me 75k, and the bank wanted a 25% down payment, it appraised at at least 100k).

I probably put in 25-30 offers to get those 5 places as well.

It wasn't a single apartment block, most of those are wanting 100k/door even for bachelors, so I'm picking individual units right now...not the best solution, but in this market, you have to take what they give you...

Working on an offer for 12 more doors, but getting them won't be easy...


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## Causalien (Apr 4, 2009)

Just a Guy said:


> Western Canada. Though I also like the look of eastern Canada. Places like this are in short supply, so I don't really need more competition. Most were foreclosures or estate sales, needed some minor work (paint and floors), but the appraisals came in high enough to cover the renos and the required down payment (so, if it cost me 75k, and the bank wanted a 25% down payment, it appraised at at least 100k).
> 
> I probably put in 25-30 offers to get those 5 places as well.
> 
> ...


I thought about doing this after seeing some foreclosure in new west and Kelowna. Question I have is, how well does this strategy perform duri g a RE collapse. I am extremely bearish about western canada RE right now.


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## Just a Guy (Mar 27, 2012)

Well, I'm already buying about 50% below market value. In a collapse, there will be even more pressure on the rental market, so the cash flow from rentals should remain fairly constant, but even so, I can afford almost a 50% reduction and still break even. 

Someone else is paying off these properties for me, so even if they drop 50% in value over the next 20 years! I'll still have generated 150k out of nothing.

I'm not buying places for $250k and hoping to break even or make my payments while praying real estate continues to climb, I'm buying things that generate a lot of cash flow even in a real estate downturn. If they get me capital gains, that's a bonus.

The places I'm finding, I think, are just early signs of a pending fall...there were years you couldn't find anything that met my criteria...if I'm wrong, I will make a killing...if I'm right, I've got a lot of padding in my numbers.


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## Causalien (Apr 4, 2009)

Just a Guy said:


> Well, I'm already buying about 50% below market value. In a collapse, there will be even more pressure on the rental market, so the cash flow from rentals should remain fairly constant, but even so, I can afford almost a 50% reduction and still break even.
> 
> Someone else is paying off these properties for me, so even if they drop 50% in value over the next 20 years! I'll still have generated 150k out of nothing.
> 
> ...


I started noticing one or two foreclosure properties in 2013 and don't recall seeing them before in the greater vancouver area. Is that what you have observed as well in your region?


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## Just a Guy (Mar 27, 2012)

I don't really have a region...but about three years ago I started to notice that there were a few properties that started to meet my criteria. For example, there was a 3 bedroom that had sold for 178k (way too much in my opinion, so it was now in foreclosure), that was listed at 100k, but not selling...it took nearly a month and a half of negotiations, but I got it for 80k (reasonable price, not great unless you're talking about this overinflated market). Back then, there was nothing even listed for under 100k (including bachelors), but also, because prices have been so high for so long, I doubt many investors were looking. Today, in that same city, there are several places listed below 100k.

In Canada, foreclosures are handed over to realtors and generally sold at fair market value...most of them aren't really good deals I've found. However, sometimes you can have one that won't sell after several listings (in the example above,the building was a condo conversion by a REIN member where the whole building eventually went into bankruptcy one unit at a time, so it took a while and no one wanted to buy in during the fall). I was the only one to negotiate on the first property, but once it sold and the price set, the entire building sold quickly...the last units had bidding wars where units sold 10k over list...I only acquired 3 doors in that place, the rest sold for too much money in my opinion.

In Vancouver, there's nothing listed in that ballpark, and there may never be. Even the foreclosures are still too expensive in my opinion, so I wait and watch...if I'm wrong, I'll still be ready to pick it up. Saskatchewan was pretty cheap about 5 years ago, but others saw that too and drove prices up. I liked the east coast, prices were dirt cheap (gotten more expensive now), oil refineries and drilling going in, people being trained in Alberta...don't like Winnipeg with the rent controls. Ontario has even worse tenant laws right now...but if the deal is too good, I'm not against making money anywhere...though I've avoided going cross boarder cause of the tax laws, financing, and hassles...that may have been a mistake, but I'm doing fine here in Canada.

If interest rates increase 1-2%, there will be a flood of properties hitting the market everywhere as mortgage renewals come up and monthly payments increase dramatically...then prices will fall as supply floods the market. My properties may lose value, but I don't care as I'm a buy and hold go for the rental income investor. When that happens, I'll buy the cream properties cheap...eventually everything will recover as the market returns to normal, and I'll (or my kids) will make a killing.


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## madMike (Feb 10, 2012)

inverstmentmentjinja said:


> So as expected bad experience from every body , I think that 300$ will get it (or save it ) from other sources and will keep me from that hassle ,
> and Yes I am single and young .


I might be in the exact same situation, ninja, probably older than you. I finished my basement, been renting for 5 yrs., cost around $15,000 to finish, rent is $650. Haven't raised the rent and all expenses have risen. 
I originally thought I'd try it for two years because my apartment isn't a real "in-law", so I have some trust with tenant. I got lucky with a female tenant, middle aged, mature, quiet. No way would I rent to a smoker.
The rent has paid off the cost of finishing the unit, but I feel like it's run its course - just my stage in life. I don't really need the extra money, about $400 after expenses. Some small annoyances like her leaving lights on, laundry with warm water, etc. but no big hassles.

I figure I will end the arrangement this spring, or at least raise the rent. Beware the taxman that wants 1/2 of your rental profit. If tenant claims rent on their taxes, you have to submit that you spent $$$ on home improvements. I've been lucky so far - but I always worry about "surprises" from Revenue Canada. Also, my insurance co. sent an inspector to check inside and outside, garage, then followed up with a list of "requiremnents" to fulfill.


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## Causalien (Apr 4, 2009)

I am only looking for cream of the crop condos right now. So will probably have to wait till the full collapse as I only want to manage 1~2 rentals max as most of my worth is in stock.

Spent some time analyzing and asking about the USA collapse while I was there. It seems that within 4 years of the collapse event, there were still prime properties to be bought as it was something that devasted everyone's ability to buy.(or at least 60% of the population) Prime RE recovered within a year, but if you are willing to buy one block away from downtown, those units stay on sale for much longer.


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## Just a Guy (Mar 27, 2012)

Yeah, but the issue with the states is all the different state laws...in some places the taxes are different (Florida) for foreign owners, others you can't legally do the work yourself (even painting)...

You may want to up your limit a bit...there are tax benefits that kick in when you own 3 or more. Also, there is a differrence between investing in rentals and investing for capital gains. I prefer rentals, as I feel like there is a little bit I can control (though I'm probably fooling myself).

There is no guarantee that the collapse will actually happen...it's been primed to fall for more than a decade, but interest rates kept falling and fuelling the fire...while that can't happen anymore, some other factor may creep up to keep it going. My money is on a collapse personally.


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## Causalien (Apr 4, 2009)

Just a Guy said:


> Yeah, but the issue with the states is all the different state laws...in some places the taxes are different (Florida) for foreign owners, others you can't legally do the work yourself (even painting)...
> 
> You may want to up your limit a bit...there are tax benefits that kick in when you own 3 or more. Also, there is a differrence between investing in rentals and investing for capital gains. I prefer rentals, as I feel like there is a little bit I can control (though I'm probably fooling myself).
> 
> There is no guarantee that the collapse will actually happen...it's been primed to fall for more than a decade, but interest rates kept falling and fuelling the fire...while that can't happen anymore, some other factor may creep up to keep it going. My money is on a collapse personally.


I am somewhat in a special situation with USA with regards to RE and I've had some interesting conversation with rich cats who were able to work around that problem with corporations. But in any case, the laws are probably miniscule compared to the hit to rich cat's credit line that enables them to buy. Full recourse or not, it made no difference.

I'll look into 3 if prices dropped enough thanks for that info, but I still have reservations about becoming a full time landlord. What is money if you can't have your freedom.


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## Just a Guy (Mar 27, 2012)

It's not as bad as people make it out...most of my time is spent looking for new places. I keep my places in good repair, screen my tenants and rarely hear from them. That's not to say I haven't had bad tenants, I believe it's a 10/10 rule 10% are bad and of those 10% (1%) are really bad...Even the really bad ones usually only involve minor repairs and paint (I've got a good contractor). I probably have less stress from all my rentals in a month than most people have in one day on the job...and I make a lot more.


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## inverstmentmentjinja (Nov 25, 2013)

madMike said:


> I might be in the exact same situation, ninja, probably older than you. I finished my basement, been renting for 5 yrs., cost around $15,000 to finish, rent is $650. Haven't raised the rent and all expenses have risen.
> I originally thought I'd try it for two years because my apartment isn't a real "in-law", so I have some trust with tenant. I got lucky with a female tenant, middle aged, mature, quiet. No way would I rent to a smoker.
> The rent has paid off the cost of finishing the unit, but I feel like it's run its course - just my stage in life. I don't really need the extra money, about $400 after expenses. Some small annoyances like her leaving lights on, laundry with warm water, etc. but no big hassles.
> 
> I figure I will end the arrangement this spring, or at least raise the rent. Beware the taxman that wants 1/2 of your rental profit. If tenant claims rent on their taxes, you have to submit that you spent $$$ on home improvements. I've been lucky so far - but I always worry about "surprises" from Revenue Canada. Also, my insurance co. sent an inspector to check inside and outside, garage, then followed up with a list of "requiremnents" to fulfill.


Do you fear of the tenant may call a fire man on you ,some people told me if you get into argument or asked the tetant to get out, he may threat you by calling fire man because he know the apartment is not legal and I will get fined heavily


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## Chris L (Nov 16, 2011)

inverstmentmentjinja said:


> Do you fear of the tenant may call a fire man on you ,some people told me if you get into argument or asked the tetant to get out, he may threat you by calling fire man because he know the apartment is not legal and I will get fined heavily


Contrary to popular belief the city and fire have very little recourse when it comes to basement suites. Yes, the city can charge you fees and even sue you into court, but the free world says it's hard for them to force you into doing something with your own home. That being said, you should make it safe and follow the rules anyway. Not much of a mystery there. Our city is quite stringent, the the point where it's nearly impossible in some situations to meet the demands it imposes. I have advised many to jerk the city around as much as possible right back and this sort of thing drags on for years with no changes. I point out their powerlessness, so you have them in, promise them changes, get ride of tenants to prove it's empty.

What you don't jerk around with are smoke detectors, proper fire escapes and the important bits. You don't want to be losing sleep at night if someone is trapped in your basement for death when you didn't have interconnected smoke detectors and proper fire escapes including egress windows and illegal electrical wiring, a bad furnace without sprinklers (if that's code), etc. Otherwise, the city can go have a nut. It's your house after all. Make sure you have good house insurance that covers having a renter.

Illegal suite or not, the tenant protection act requires them to pay rent. Been there, done that.


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