Newly finished basement suite; lease/rental questions

General Landlording & Rental Properties
12yFollow

Newly finished basement suite; lease/rental questions

Jarrod English
Homeowner · Edmonton, Alberta · Member since 2013 · 35 posts · 6 votes

Hello,

I've finally taken my first step towards real estate investing and have a finished basement suite in my home. It has a separate kitchen and laundry. Now that the basement suite is done, I'm thinking it would be very smart for me to move out after completing some renos upstairs and renting out the upstairs. Even if I move into an apartment for rent or stay with a friend and pay some $500-$700 a month, I'd still be making money on the upstairs.

So my 2 options for the current basement suite are:

- I could rent out the whole suite with utilities/internet for maybe $1200-$1400.

- Or do it based on room with utilities/internet at around $500-$700 per room for 3 rooms. One room is large, one is medium and one is small so I was thinking of charging $550 for the small room, $600 medium and $650 large (possibly $1800/month).

If I go the individual room route, I would have to furnish it and would put in a dresser, bed and desk. I like this route because I also don't have to worry about people moving in and out and hauling their furniture through the suite as everything is brand new down there haha.

So my questions are more related to if I go on a per room basis and buy beds, my mom suggested buying mattress protectors and plastic sheets for the beds to protect them. I'm wondering if tenants would be uncomfortable with that as I imagine it's noisy to sleep on. On the plus side it protects the beds and I don't have to worry about replacing them (though they'll only be $100 or so for a small mattress). Does anyone have any experience with this sort of thing?

I was also curious about chores, specifically shoveling snow as I won't have any shared space with the tenants. Winter is coming and I will be living upstairs and figured it's fair that I shovel the front walks and the tenants would shovel on the side of the house which is where they would walk to get to the back door. Does that sound reasonable?

And then the taking care of the bed coverings and the snow shoveling, is this something that should be written down in the lease? If I furnish things, should there be some sentence in the lease about "all furniture in the suite is property of the house" so there's no disputing what's owned by me/the house if there are issues with a tenant and furniture? If something gets damaged then it's covered.

I think that's all I have for now but I'm sure there will be lots more to come so I'll use this thread to bounce ideas off everyone.

Any help is greatly appreciated!

0Reply
32 views

Most Popular Reply

Jean BolgerPro Member
Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
12y

wow, $500 for a small basement room- your rental market must be really tight!

I'd agree with Jon- rent to a single family if you can. If you rent to students, why not just a roommate situation? Rent it to some folks who want to share a place. That way you have ONE lease, much easier. The trick is to make sure the lease says they are "jointly and severally" responsible for the rent- that is, if someone moves out, the others have to cover the full amount of the rent.
I have rented w/ roommates before, when I was younger. I would never consider renting a room with strangers. think about it, would you want some stranger deciding who you would be sharing a bathroom and kitchen with?

1Reply
See this reply in the discussion

12 Replies

Jump to latestLatest
  • Jon K.
    Member since 2011 · 798 posts · 216 votes
    12y

    Rent to a single family.

    Renting out room is a pain in the butt. It's risky, and it's hard to find tenants who want to live with each other. Especially if one tenant smokes, the other doesn't-- or one tenant has kids and the other doesn't. And what about co-ed bathrooms?

    And there's much more wear and tear with less ability to charge any individual tenant for damage to shared spaces in group houses.

    Plus your city might not allow it-- zoning and unrelated persons.

    Plus your insurance company might not even cover you.

    Plus people will be bringing over their guests to stay, smoking, etc. and you'll end up with issues. Safety issues, liability issues, roommate arguments. Or they'll have pets that you didn't approve. Or let their boyfriend/girlfriend move in without your permission. And what if they steal from each other or someone forgets to lock the door and there's a break-in? Or if someone leaves the stove or oven on and causes a fire? Liability, liability, liability. Not worth it in room houses.

    Plus more cars parked = more complaints from neighbors. More noise. More damage. More vacancy. More parties if young people.

    Complaints about their roommates not cleaning the common areas, hogging the bathrooms, or even complaints about some roommate coming on to them (or worse accusations of safety issues, especially in co-ed situations).

    They'll complain about someone's stereo or TV noise or coming in at all hours.

    They'll complain that their roommates never clean the common areas.

    They're renting a room. It's unlikely that they'll even clean their bathrooms enough, let enough shovel snow. And what about lawn mowing? Yeah, no, they're not going to pitch in. They're broke and renting a room.

    If you live there a hospital or something with executives needing short-term living, maybe you could find classier people.

    You'll want bedroom locks on each door.

    You'll have to buy furniture, then replace furniture they break. That's more damage and more expense. You're not going to profit as much as you're expecting. They'll spill stuff on the carpet. You'll have vacancies (not everyone is willing to live with just anyone-- having a 22 year old guy living there might make a 50 year old woman not be willing to rent a room for you). It's not that easy to find strangers willing to live together. And if it's fully furnished, they'll want dishes. Oh, they'll wear those out and break some of those too. That's more expense that you'll have to pay for.

    They will damage stuff or stain the carpet or not clean the common areas when they move out. And, how can you charge Joel for damaging the carpet when he says Trent damaged the common area carpet? No one is going to admit that they damaged the carpet and want to pay up.

    Plus you'll likely be stuck paying utilities, unless you make them split the utilities. They'll RUN the utilities up to ridiculous amounts. They'll turn the AC down to 60 in the summers because they're not paying for it. They'll shower for half an hour because... why not? They're not paying for it. They'll let their friends come over to do laundry. They'll crank up the heating system in the winter.

    Plus, they'll want internet. Another pain in your butt. I would never ever want to provide wi-fi for a tenant. They'll download stuff they shouldn't and you could get in trouble for it. And they'll call you to whine that it's slow, not working, etc.

    Having a furnished place doesn't necessary mean they won't drag their furniture in also. They'll still have stuff to drag through your property. They may or may not use mattress protectors. Really, mattress protectors are the least of your concern here. They WILL damage your furniture at some point.

    You'll get a different class of people wanting to rent $500 bills paid rooms. Sometimes students, sometimes international students, occasionally short-term professionals visiting the area, plus people who can't afford anything else.

    I've rented our rooms in roommate situations. It sucks. Hard to find qualified tenants, plus there's more wear and tear, more issues, more vacancy, and it's an overall pain in the butt.

    Rent it to a single family. Get a good security deposit and screen them well. Get a middle-class professional who is responsible, clean, wanting long-term.

    0Reply
  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    12y

    @Jarrod English

    I agree with @Jon K. Renting rooms is not a passive real estate investment, its more like a business and full time job. It will require more work on your part. Its not a "set it and forget it" type of business.

    The tenants will expect everything to be taken care of for them, like cutting the grass, shoveling the snow, paying all the utilities, having a cleaning service and providing certain necessities like toilet paper. they will expect it to be like a hotel.

    But the number 1 thing to investigate first is whether it is legal. Here in the US, there are many places where the zoning does not permit, rooming houses, (defined as locks on bedroom doors), more than 3 unrelated people, group homes or other community living in areas zoned for single family zoning. Often times they also require a business license and business inspections for this joint living situation.

    0Reply
  • Jarrod English
    OP
    Homeowner · Edmonton, Alberta · Member since 2013 · 35 posts · 6 votes
    12y

    That sure is a lengthy reply on the downsides of things haha. I the point about liability is definitely a good one. Some bonuses to my suite is that they are all lockable doors and there are no carpets. I won't be allowing pets or smokers either. Probably broken furniture and keeping the place clean will be the toughest. I don't think I would do a co-ed type of situation, it would be all guys or all girls as there is only one bathroom they'd have to share.

    I'm from Canada and we're allowed to rent per room here. I was mainly going to look at students (national and international) as they would be the easiest to maintain I think. Keeping to themselves studying in their rooms all the time heh.

    Good point about the set it and forget it type of investment. Perhaps there will be more time spent trying to find single room tenants than an individual. One bonus is that I live upstairs so I'll know what mostly goes on. I was thinking it would be smart to have a monthly visit to the basement as a sort of check in to make sure nothing is damaged and the place is clean. Just have to give 24 hour notice here before doing that.

    If anyone has any more experience with room versus full suite rental, by all means share your story. I'll have to think about this a little more.

    0Reply
  • Jean BolgerPro Member
    Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
    12y

    wow, $500 for a small basement room- your rental market must be really tight!

    I'd agree with Jon- rent to a single family if you can. If you rent to students, why not just a roommate situation? Rent it to some folks who want to share a place. That way you have ONE lease, much easier. The trick is to make sure the lease says they are "jointly and severally" responsible for the rent- that is, if someone moves out, the others have to cover the full amount of the rent.
    I have rented w/ roommates before, when I was younger. I would never consider renting a room with strangers. think about it, would you want some stranger deciding who you would be sharing a bathroom and kitchen with?

    1Reply
  • Jon K.
    Member since 2011 · 798 posts · 216 votes
    12y
    Originally posted by Jean Bolger:
    wow, $500 for a small basement room- your rental market must be really tight!

    I'd agree with Jon- rent to a single family if you can. If you rent to students, why not just a roommate situation? Rent it to some folks who want to share a place. That way you have ONE lease, much easier. The trick is to make sure the lease says they are "jointly and severally" responsible for the rent- that is, if someone moves out, the others have to cover the full amount of the rent.
    I have rented w/ roommates before, when I was younger. I would never consider renting a room with strangers. think about it, would you want some stranger deciding who you would be sharing a bathroom and kitchen with?

    This. You could find a "single family tenant" who are really just students who are both liable for 100% of the rent.

    Living upstairs changes things a little. I would still check with zoning and insurance. Some cities require things like fire proofing, windows in bedrooms, and similar.

    It's not easy to find 3 random strangers all of the same gender that are willing to live together. Plus, not all prospective tenants will want to live with whatever age of tenant you have left. If you have a 22 year old tenant, a 62 year old is not going to want to rent a room. If you have a 62 year old tenant, a 22 year old is not going to want to rent a room.

    There's much more vacancy with renting rooms, much more turnover, and you're paying upfront for furniture that will get broken.

    It can be decent money, but it's more hassle finding people and then babysitting them. If a current tenant doesn't want to live with someone you find, they'll make your house showing awkward and you'll have more vacancy. Think about it. If you were living there and weren't responsible for paying the entire basement rent, why work with your landlord to help find a new tenant? The current tenant could just make your prospective tenant showings awkward so that they could have the whole basement to themselves without having to pay for it.

    Is there a college nearby? That would help you find applicants wanting something like this. Medical students or nurses or similar would also be an option.

    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y
    Originally posted by Jarrod English:

    I'm from Canada and we're allowed to rent per room here. I was mainly going to look at students (national and international) as they would be the easiest to maintain I think. Keeping to themselves studying in their rooms all the time heh.

    Jarrod: I'm from Canada as well, but that's not a free pass in this matter. While most provinces recognise boarders under their tenancy acts, renting by the room, pending the number of rooms and whether the property is owner occupied, may be regulated by local by-laws.

    For example, we have a student property which rents by the room. It is also a duplex and my sister-in-law lives (owner occupied) in one unit ... and the other is rented out by the room. If it was not owner occupied, it would be considered a rooming house and would not be permitted in its present location.

    @Jon K. - Renting by the room does not automatically imply higher vacancy. It really depends on your location and your clientele. Our student house enjoys one of the lowest vacancy rates of any of our properties ... this autumn we had a waiting list of folks wanting a room. Our clientele are mature, male international students in one unit and mature female international students in two rooms in my sister-in-law's home.

    0Reply
  • Shahriar K.
    Homeowner · surrey, British Columbia · Member since 2013 · 98 posts · 8 votes
    12y

    I would also like to say another option that I have seen is having international students stay at your residents. The rental income is very good(it depends to your location and country the students are coming from)and I haven't heard any horror stories of damages to the property, actually from the people that have done this they say the students are usually out discovering the city and traveling and not home. the only downside is you do have to provide meals and all the furniture's.

    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y

    @Shahriar K.

    The clientele at our student house are all and, with the exception of one, have always been international students. We do not provide meals, but do supply a furnished unit (kitchen, livingroom, bedroom) and, in the kitchen, supply a basic set of dishes and cookware.

    They are a quiet and studious lot, no parties, no damage and rent is paid on-time.

    0Reply
  • Jarrod English
    OP
    Homeowner · Edmonton, Alberta · Member since 2013 · 35 posts · 6 votes
    12y

    See that's what I was kind of aiming for was national/international students. I inquired about the need for room housing with the university and they said there was always a high demand. If I provided room/utilities/internet I think it would fetch me at least $500 a room. I've heard of some places going as high as $700. I'd have to do some local market comparison first. I went and purchased all the appliances last night. Didn't get furniture as I was leaning towards what everyone was saying and that I should avoid the per room basis. Perhaps I should have been clear that I was focusing on bringing in students :)

    Does that change anyone's opinion?

    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y

    @Jarrod English

    The emphatic warnings of @Jon K. and others should be understood. I too was of this opinion when we first acquired our student house and was set to reposition it as a simple duplex; renting the downstairs as a single unit with my sister-in-law occupying upstairs with roommates of her own. As I was planning the small renovation that would see the end of the boarding house, I realised the house was serving a clientele not being reached by our other student apartments.

    We decided to leave it for a year to measure the behaviour / performance and found that it had low vacancy, no defaulted payments, no damage, and the tenants almost always brought us new tenants before they would leave.

    Just over 2-years in, we are still happy with the house ... it is more work, but it is also more return. That said, I would not want a boarding house in most other areas of the City as the clientele would be different and risk/reward would not be worth the extra work.

    0Reply
  • Jarrod English
    OP
    Homeowner · Edmonton, Alberta · Member since 2013 · 35 posts · 6 votes
    12y

    I'm curious, when you do a lease with students for your properties, are you creating a fixed term lease for a whole year or something month to month? Or do you have the lease set for 8 months to match the school year?
    Thanks

    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y
    Originally posted by Jarrod English:
    I'm curious, when you do a lease with students for your properties, are you creating a fixed term lease for a whole year or something month to month? Or do you have the lease set for 8 months to match the school year?
    Thanks

    The answer is: Yes.

    If a student elects month-to-month, they pay full rent

    If they sign a term lease for the Fall and Winter academic terms (8-months), they get a slight rent reduction (~5%)

    If they sign an annual lease, the get a slightly larger reduction in rent (~10.5%)

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free