This can be a sound investment strategy for your clients; to actualize the dream of owning a home or to further expand their real estate investment portfolio.
But there are a few things to advise your clients on before they decide to become a landlord in their own home.
1. Financial implications
One of the most obvious advantages to adding a legal basement suite is the rental income, which can help pay down the mortgage or assist with the on-going yearly expenses and maintenance of a property once the mortgage has been paid off.
Another advantage is the increase in re-sale value because income suites attract a wider range of buyers, such as first-time homeowners hoping to climb up the property ladder, real estate investors wanting to build up their portfolio, or buyers who plan to live with extended family or elderly in-laws.
Having an income property does come with some tax implications. While the homeowner will need to declare the income they receive each month on their tax return, they will also have the benefit of writing things off, such as a portion of the yearly home maintenance, mortgage interest or utility costs, if they are included in the rent. There may also be other tax benefits or liabilities depending on the individual situation, so it is best to speak with an accountant for the details.
2. Know the rules
Find out what the rights and responsibilities are for both landlords and tenants by visiting the municipal bylaw office. They will supply the homeowner with a copy of the Rental Act, which outlines the rules and regulations governing rental suites in the area and the procedure to resolve any disputes that may arise during the tenancy.
The bylaw office will also determine whether the planned income suite complies with local zoning plans or if any permits are needed to legalize changes to the existing suite.
Income suites are a hot topic these days given the rising costs of homeownership in Canada. The concept is simple enough: a homeowner can turn an area of their home into a legal, self-contained apartment then collect rent each month to off-set the costs of owning and maintaining the property.