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Things to Know Before Turning Your Empty Space Into a Rental Unit
Have an empty space in your home that you are not using? Why not turn it into a lucrative passive income instead of wasted space! Yes, then you can make money while you sleep and have a positive cash flow coming in without a whole lot of extra work on your end. This all sounds fabulous! But wait, how do you go about this, and is it right for you? Is there legal action you need to take? If this is something that you have contemplated, reading this article could be a great way for you to figure out if renting out your space is the best option for you.
There are many things you need to take into consideration when investing in real estate. First, figure out just how much of your space that you want to rent out. Perhaps it is only a room rental, basement, or maybe you want to rent out your entire space. Any sort of rental unit will take time and effort and following the simple steps below will help you get ready to jump into your landlord suit.
Do The Work
Before you decide that renting out your space is the right decision, make sure that you can afford the upfront costs of maintaining your house and making sure it is safe. Go around and make sure that all smoke detectors and carbon monoxide detectors are in working order. Check all light bulbs and plumbing to make sure nothing is burnt out or leaking. If you are renting out a basement unit, make sure that there is a window (one that a person would be able to fit through!) so that your tenant has a fire route. All appliances and any furniture that may be included need to be working properly and safe to use. You may want to hire a private building inspector to take a thorough look at your space. If you are unsure on who to contact as an inspector, give us a call at 613-457-5000 and we would be happy to refer you to a great inspector.
No Surprises!
Though taking on a tenant can be a fantastic source of income, you do need to be aware of the costs that come along with it. The work that needs to be done ahead of time will cost money, and then during the time of tenancy, there may be certain problems that occur. Appliances may break, carpets may need cleaning, drywall may become scuffed or, heaven forbid, the tenant may miss a month of rent. There are lots of unexpected costs that can occur at any time and you want to make sure that you have the overhead to cover these little surprises. If you have an entire single or multifamily house you are renting out, you will also want to decide if you should hire a property manager to help take care of it.
Put a Price on It
One thing is for sure when renting out your space, you want to make sure that you are bringing in more money than you are putting out. Figuring out how much rent to charge for your space can depend on a few different things. The size of your space, quality of space, location, parking, inclusions and amenities, etc. A great way to make a well thought out decision on how much rent to charge is to contact the Susan & Moe Team. We can look at comparable rental units in your area to give expert advice on the best rent to charge. Hiring a Realtor to rent out your home is also a great way to advertise and market your unit as well as help you find a trustworthy and qualified tenant.
Manage Your Finances
Remember that going into a rental agreement is a huge decision to make. You will need to set up some sort of system to manage your finances. Whether you set up a Quickbooks account or just a simple spreadsheet, mare sure that there is a source of record-keeping that you are keeping up-to-date. You may want to consider opening a separate bank account for the simple purpose of managing your rental finances to keep a balance between your personal and your rental income.
Create Your Lease
One of the most important aspects of renting out your space is to make sure that a lease has been drawn up and signed prior to your tenant taking possession. The Standard Form of Lease is available for you straight from ServiceOntario and can be downloaded and filled out electronically. If you decide to write your own lease, remember that a proper lease should cover the tenant / landlord full names, the rental unit address, contact information for both sides, term of tenancy, rent amount and due date(s), service and utility inclusions, rent deposit, and any other important details specific to your unit. Make sure that both parties agree, sign off on the lease, and both have their own separate copies. Failing to have a lease signed can sometimes end up in awkward and ugly situations that you don’t want to put yourself into. There are many legal rules that you need to know before becoming a landlord and I suggest that you have read and have a strong understanding of the Ontario Residential Tenancies Act. If applicable, it is probably best if you speak with your lawyer before jumping into a landlord-tenant agreement.
Now that you have the first steps in getting your space ready to rent, make sure to evaluate your finances and be sure that you are ready to make this choice. Remember that the struggle of becoming a landlord isn’t for everyone, although when done right, it can be a great way to earn a passive income. You can also develop life-long relationships and the experience of being a landlord can be very rewarding knowing that you have provided a home for another human being for a time in their life.
For help on getting your space ready and on the market for rent, give us a call at 613-457-5000, or send us an email at [email protected].
