Renting Out Your Suite – Things to Consider
Posted by Niels Madsen on
Thinking of buying a home with a suite and renting it out? This can be a great idea to not only offset the cost of home expenses but can also potentially help with qualifying for a mortgage. However, it's essential to understand the intricacies and responsibilities that come with a suite. Here are some considerations, from financial implications to legal responsibility to being a landlord.
What is a Suite?
Firstly we have to clarify what a suite is. A suite is an independent living area within a single-family dwelling. It includes its own kitchen, bathroom, at least one bedroom, and must have a direct access door leading outside. While basements are a common location, they can be situated on any floor or even in the garage. It's important to note that only one rental unit is allowed per property, and the home must be a detached, single-family residence.
Benefits of Having a Suite
Having a suite offers several significant benefits for homeowners, with the most prominent being the additional revenue it can generate. It’s an opportunity to offset various costs associated with homeownership, which can be particularly beneficial for first-time homebuyers or those looking to manage their expenses more effectively. Being able to generate rental income is a huge help to just qualify for a mortgage, though it should be noted the status of the suite, whether it is illegal, authorized or unauthorized, can have an impact on this.
Additionally when you have a suite, it can substantially increase the overall value of your property. A home with a suite on the market attracts more potential buyers, especially those interested in properties that offer additional income-generating opportunities. Note that it must be a legal suite, discussed in more detail below.
Beyond the individual financial benefits, secondary suites contribute positively to the community as a whole. By providing more rental housing options, these suites help address housing affordability challenges, especially in high-cost areas. The Canada Mortgage and Housing Corporation (CMHC) actively encourages this practice due to its positive impact on increasing the availability of affordable rental housing.
Ensure Your Suite is Legal
In British Columbia a significant number of suites are considered unauthorized, which means they do not meet all the requirements to be legally recognized as secondary suites, lacking essential elements such as fire separators, smoke alarms, appropriate door heights, laundry facilities, and compliant suite entrances, among other factors. Some of these suites might have been developed before changes in the rules or no longer adhere to current safety and fire codes, particularly if it’s in an older home.
When purchasing a home with a suite that you plan to rent out, it is important to confirm the suite's legal status. If the suite is outdated or does not comply with the necessary bylaws and codes, you will need to identify the improvements required to bring it up to compliance. Various municipalities may have different regulations regarding suites, so ensure their specific regulations and restrictions are implemented.
Why You Need to Legalize Your Suite
If you plan on renting out your suite, you need to make sure it is legal and up to code. There are many reasons for this, including:
Legalizing your suite ensures the safety of occupants by adhering to various safety standards designed to protect their health and well-being.
Having a legal suite allows you to obtain adequate property and home insurance coverage, providing protection in case of emergencies or disasters caused by tenants.
- Home Value
Legalizing your suite helps maintain the value of your home and may even increase its worth, as the completed and inspected work involved in the legalization process adds value to the property.
- Avoid Penalties
If an illegal suite is reported and confirmed, the homeowner may face additional water and sewer fees, and could be subject to bylaw compliance proceedings, which could result in costly penalties.
Is Being a Landlord Right for you?
Becoming a landlord can be a smart financial decision and a source of income, but it's essential to recognize that it might not be the right choice for everyone. Before delving into the landlord role, there are several factors to consider.
As a suite landlord, you are opening up part of your property to tenants, which means you'll be sharing your living space with others. This arrangement can lead to a loss of privacy and personal space, which might not be suitable for those who value their solitude and quiet living environment.
Time and Energy Demands
Being a landlord involves more than just collecting rent. You'll have responsibilities such as handling maintenance and repairs, responding to tenant inquiries or concerns, finding new tenants when vacancies arise, and managing legal and financial aspects of the property.
In addition to the initial investment in the property, you'll need to budget for ongoing maintenance, repairs, property taxes, insurance, and other expenses. There might be periods of time with no tenants, leading to a loss of rental income. Proper financial planning is necessary to ensure you can handle these costs without significant strain.
Owning and managing a rental property comes with certain risks. There is always the possibility of unforeseen issues arising, such as property damage, problematic tenants, or legal disputes. While proper screening and insurance can mitigate some risks, there's still an element of uncertainty involved.
Regulations and Legalities
Being a landlord means adhering to various local and national rental laws and regulations. Staying compliant with these laws is essential, as failure to do so can lead to legal consequences. Understanding landlord-tenant laws and seeking legal advice when necessary is crucial for a successful landlord-tenant relationship.
If you decide to be a landlord, there are a few essential steps to take. Firstly research the fair market rate for rent in your area to assess whether rental payments are worth it for your situation. Consult with a legal expert who specializes in landlord and tenant issues as they can give you valuable insight. You will also want to familiarize yourself with privacy laws to ensure you can properly handle tenants' personal information while complying with local privacy regulations.
Consider hiring an accountant or educating yourself about business bookkeeping since running a rental property is akin to managing a business. Keeping track of expenses, assets, and income is vital, and an accountant can assist with financial management and taxes. Be aware of the rules and regulations concerning rent increases and the notice period required for such changes.
While being a landlord has its challenges, careful planning and attention to detail can lead to a rewarding and profitable experience. Just be sure to carefully consider financial commitments, time investment, potential risks, and emotional aspects involved in managing rental properties to determine if it aligns with your lifestyle, financial goals, and risk tolerance.
Buying a house with a suite presents an excellent opportunity to maximize your investment, offset home expenses, and provide affordable rental housing. However research and evaluating the potential risks and benefits are vital steps you need to do before committing to renting out a suite. Helping you on this property journey and finding that perfect home is exactly what we do at Madsen Langlois, so get in touch to get started.