Thinking about renting out your basement to boost your retirement savings, taking in a student or buying an income property? Here are 10 things to consider before you get started.
- Do you know your local landlord-tenant laws? Get familiar with the laws in your province.
- Do you have a rental agreement? Have a detailed rental agreement completed based on your provincial laws.
- Do you know any maintenance professionals? Have a list of trusted repair professionals you can call when needed.
- Do you have a flexible schedule? Your tenants are your customers, so they’ll expect you to provide a certain level of customer service. Give them your contact information and be clear about what an “emergency” is to you.
- Does your municipality or homeowners association allow you to be a landlord? Check with your local city hall for municipal bylaws. If you’re a condo owner, check with the board of directors for rules regulating the rental of a unit or room(s).
- Will it be a reliable source of income for you? Before you set your price, research similar rental costs in your area and subtract the expenses to determine cash flow. Expenses can include mortgage interest, property taxes, insurance and utilities. Don’t forget to budget for increases in utility costs, condo fees, or homeowners association fees. Also, don’t assume you’ll receive tax benefits; be aware of what you can and can’t claim on your taxes.
- Are you willing to rent to roommates? If you have more than one tenant in the unit, consider offering them a roommate agreement. It can help them settle disputes and acts as a reminder that you expect them to take care of the living space. You can find a variety of pre-written contracts online.
- Do you have enough insurance? Even if you’re only renting out a room for a month, call us to review your insurance policy. We’ll help you understand your policy, find out if you need to increase your liability, and tell you how to save on rates.
- Are your tenants insured? Asking them about tenants insurance can help you start the conversation about the limits to your policy. Most first-time tenants don’t know that their landlord’s policy may not cover their belongings.
- Do you know what to do if you get a bad tenant? It can take anywhere from three months to a year to get a tenant evicted. That means months of lost rental income you may never recoup.
Minimize your risk by doing a reference check on all tenants. Some tenants can be very resourceful when providing background documents. It’s a good idea to ask for a full credit check report, available through several online credit reporting services. You can also ask for a criminal background check for additional information.
For more information on homeowners insurance, contact your local Financial Advisor.