Renting Out A Suite: What You Need To Know
Posted by Niels Madsen on
For many BC homeowners, renting out a suite in their home is a valuable source of secondary income. If this is something you’re considering, then you not only need to consider exactly what that will entail, you will also need to be mindful of being in compliance with all the relevant rules and regulations.
With that in mind, here’s our primer to everything you need to know before renting out a suite.
Why Even Have A Suite?
The primary reason for having a suite, whether that’s from renovating space in your house to create it, or having a home with a built-in one, is simple: affordability.
Whether you’re a first-time buyer who needs some help getting onto the property ladder, or you’re looking to afford a bigger and better home, a suite can be a great fiscal help in navigating a market where the cost of homeownership is rising precipitously.
The only thing to keep in mind is that if you want the rental income to count towards your qualifications with your bank, you will need to ensure you’re in line with the relevant guidelines.
Legal Vs Illegal Suites
Illegal suites are unfortunately commonplace in BC, with many either seeing them as a shortcut or simply not being aware of the distinctions.
However, illegal suites also mean that homeowners are assuming unnecessary risk and liability, as well as exposing themselves to potential fines.
Violations can range from minor issues such as a slightly-too-low ceiling, to big issues such as major fire safety risks. While suites with minor violations can't legally be rented out, they are (usually) technically legal to have in your home for you and your family's own personal use.
Illegal suites with bigger health or safety violations are a different matter. They can result in fines, and the homeowner being forced to either bring the suite up to code or remove it entirely. Further legal action can sometimes be taken by the suite tenants or government depending on the circumstances, which can end pretty badly for some would-be landlords.
A suite will be classified as legal if it:
- Adheres to zoning bylaws
- Is in compliance with provincial building codes
- Has all of the required building, electrical, and plumbing permits.
In addition to these criteria, the site will also need to have been inspected by a qualified inspector and a final occupancy permit issued.
It’s also important that you are aware of any regional differences between districts when it comes to suite legality. Depending on your municipality, there may be a specific minimum property size that you have to match in order to get approval for a secondary suite.
It's often best to put in the effort of legalizing a suite, especially if you plan to rent it in the future. Legal suites reduce your risk, increase your home's value more reliably, keep tenants happier, and are a bigger return on your investment.
Cost Of Creation
If you’re using a suite to offset the cost of mortgage payments or provide additional funds to secure homeownership, it’s important you factor in the cost of building or renovating a room to create a suite into your calculations.
It’s hard to provide a baseline for what this will cost, as much will depend on the contractors you use, the materials you need, and the general costs of renovations.
As a rough estimate, the cost could range anywhere from $2,000 to $35,000. There are also administrative costs that come with securing the right permits and permissions that will be set by your local authority.
Do Your Research First
If you’re counting on rental income from a suite to help you qualify for a mortgage it’s important to manage your expectations and do your research. There are a lot of misconceptions floating around, and it can be easy for prospective buyers to get swept up in them.
The reality is that lenders will typically only include 50% of the potential earnings towards qualification, and there will be stipulations: such as ensuring the suite is a legal one, and that the income is declared on your tax returns.
That’s where research and due diligence comes in, before you finalise anything or move too far ahead, make sure your calculations add up and you can meet your lenders requirements.
Get The Right Tenants
Once you have everything sorted, actually renting your suite out isn’t as simple as people may assume.
Despite the large number of potential tenants in the rental market, you’re going to want to be selective and know exactly the kind of tenant you’re looking for.
Because this person will be living on your property, your screening process may need to be a little more personal and thorough, as there’s a higher degree of trust and interaction involved than a typical rental situation.
There’s also the matter of knowing exactly what kind of lease you want. This will depend largely on the financial income you’re looking to generate from it.
This means figuring out:
- The monthly or weekly rate
- Whether you want to rent on a one year lease or month to month basis
- Whether you will require your tenant to contribute to the utilities as part of the rental agreement
Make sure you have a clear contract in place, which will protect both you and your tenants.
Make Your Suite An Attractive Proposition
Because your homeownership is dependent on this rental stream of income, it’s imperative you make sure that your suite is as attractive to your potential tenants as possible.
To entice renters make sure:
- Your listing is detailed and accurate
- Your listing has plenty of well-lit photographs
- The aesthetic and features will appeal to your likely target market
- Any and all appliances are functioning, and consider whether it would be cost-effective to upgrade them if you’re looking to charge in the upper brackets of prices for your area
If you’re looking to get on the property ladder, you need an expert by your side. Here at Madsen Langlois, we have a proven track record of helping buyers and sellers get the outcome they want. To find out more about how we can help you, get in touch with us today.