With house prices, unemployment rates, and divorce rates increasing annually, it seems like a no-brainer to offset your housing expenses with rent... especially if the basement is a space you can do without. Being a landlord sounds simple. Most peoples understanding is that they'll have to find tenants, fix leaky taps, spruce up the house, and comply with various bylaws.They feel like these are tasks that could easily be deal with in order to offset their expenses and become mortgage-free sooner.
The reality is, finding the right tenant is more time-consuming than it appears, things can and often do break at inconvenient times, you can't evict someone just because you don't like their friends, and being a landlord is a demanding, round-the-clock responsibility.
While a rental suite can be an effective way to help you pay off your mortgage, you have to treat it like the business it is.
The biggest shock for most first-time landlords is the diminished privacy. Think of the shared spaces - can you BBQ without being disturbed? Most people overlook privacy issues because they are focused on offsetting their costs. But this can be a big issue down the road - so deal with these spaces upfront, and in your lease agreement.
To avoid potential problems take the following into consideration:
- Try to avoid renting to family. It is difficult to use eviction or collection rules against a non-paying family member without destroying the relationship and having the repercussions ripple out into the rest of the family.
- Sign a proper written lease... Always! Even with family members. A properly written lease between you and the tenant should clearly outline the rules, late rent penalties, expectations, and the length of the term. This must be signed by every adult who is to reside in the unit.
- Don't set your rent too low. It's not a good idea to be the lowest rent in the market. You will end up attracting the type of renter whose focus is solely on dollars. This will lead to rapid turnover as they leave for the next "lowest rent" spot. To set the proper rent for your suite, go online and search for available units in your area. Make sure to look at a number of different units and be location specific in your comparisons. Look at the amenities and picture them through the eyes of a potential renter. Then place your price in the middle or middle to high end of the average comparable.
- Tell your home insurance company. When you rent out a unit in your home, you are obligated to inform your home insurance company - this is something that most people fail to do. If anything were to happen, for instance if a fire starts in the rental suite, the insurance company could say that they were not informed of the tenant and that the policy is voided.
At My Better Mortgage we're here to help. Let us help put you on the path to financial freedom.