I'm contemplating a property that has a two bedroom basement apartment. It is a SFH.
I wonder what are the potential issues aside from difficulty renting that might arise from having a basement apartment on a property zoned SFH?
Would a lender include the rent coming from the basement as income if I have two years of landlord experience?
Also, this property is on a busy street but in a very desirable part of town. I would love thoughts on this.
I would plan on living in the main part of the house which is a 3/2. Sort of separate entrances as you must enter into the property and then there are two doors going either way once you are in.
Thanks for your time and comments.
You will likely want to make sure that it is considered a legal unit (permitted?) with appropriate means of egress, lest you might have some liability concerns.
Thanks for the reply. I checked the county records and it just says single unit for unit number and single family house. That makes me think that it is not permitted. There are no egress windows. Is it possible that it could be grand fathered in somehow as a viable living space and not counted as a unit? Me thinks not. Who would I ask to see? The listing agent told me it was a single family home. Lastly, if I put in an egress window could I get it rezoned as a two unit? Would that affect valuation in a positive way? Thanks again.
Sounds like it could be viewed as just renting out a room in your home. So as far as egress and permits are concerned... As long as the tenant has unobstructed access to the outside then I wouldn't worry about it.
check with your county or city's zoning (ie, maps, and/or call them) to ask if ADU's are allowed in ur zoning. the answer is yes or no, not maybe. if so, ADUs still need to have permits and the C of O amended to show SFH plus 1 ADU and where the ADU is etc. C of Os usually list bedroom location and numbers by floor. if a C of O does not list (nor was amended to show) bedrooms in the basement, they are illegal.
not only do conventional lenders practically never count rental income for a single family primary residence, but similar issues arise when doing taxes - unless the local zoning particular to your property allows ADUs and was done with proper permits etc or u are only renting out legal bedroom/s to lodger/roomate/s (ie, basement 'bedrooms' are often illegal and a huge fire/death hazard).
Why not make the sale contingent on getting official approval that the basement apartment can be used as livable space by the city/county building inspector? If they aren't willing to do that, then forget it. Or say you want the county inspector to let you know what you'd have to do to get it into a liveable space, and the sale is contingent upon your approval based on what that would entail. And you'd need permission to have a kitchenette in there, too, probably. And if you can't get that, you'd have to rent it to someone willing to live with just a sink and a microwave.
If you can get proof that the space is liveable, then you shouldn't have any problem insuring it or renting it out to a roommate or even corporate housing space. If it's not zoned for a duplex, then you'd have to go the roommate route.
Just be aware, that if you rent an "illegal" apartment, then any contract you have for someone to live there, is an illegal contract. You would have no leg to stand on if you had any tenant problems. Illegal contracts are not enforceable.
If renting the space is legal, I don't see why you couldn't use that income later with a lender. But, why don't you ask your lender if they would consider roommate income as income if it's been consistent for two years?
Thanks for all of the responses. I'm be even more cautious but will try to see if I can get some more certain answers as to the legality of the apartment.
yep at least u can get roommate/lodger income by sharing part of ur single family house; still be wary that renting a finished basement for dwelling use that isn't listed on the property's certificate of occupancy as a bedroom/dwelling would still be a can of worms; some residential c of o's are for storage not dwelling, ie a c of o for a garage.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!