Renting out your basement is a great way to test the waters and make some extra money without the upfront cost of purchasing a rental property. While browsing online for information on the subject, it is easy to come across stories that will make you change your mind. However, we are here to provide you with some helpful tips that may encourage you to take on the initiative.
Sign an agreement
A big worry landlords have when renting out a property is that they will get in a disagreement with their tenant. As of 2018, it is mandatory to have a standard lease agreement for tenancies in Ontario.1 The document clearly outlines rights and responsibilities, such as rent, deposits, utilities, so that both parties understand the expectations from the start.1 It is important to sign this agreement as it will help give everyone peace of mind in case there is a dispute down the road.
Take note on current conditions
Before renting out your basement, be sure to document the current living environment to be able to distinguish between damage that previously existed and damage that was created by the tenant.2 This includes taking pictures and writing down notes about any scratches on the wall, imperfections in the flooring and condition of the appliances. Being proactive here can help you with reimbursement from your insurance provider later on for any accidents that were not your fault.
Choose your tenant wisely
While choosing your tenant is mostly up to your own judgement, there’s two things you should try to avoid. Firstly, try to avoid renting out to your family as it may make evicting them difficult if a disagreement arises.3 Secondly, try to avoid setting your rent to be the lowest on the market. This will attract renters who have a quick turnover rate and are always searching for cheaper accomodations.3
Talk to a professional
Cover all your bases. Talk to a tax professional about renting out your unit. They will let you know what documents to keep, how to file your tax returns in a way that avoids unwarranted expenses and will keep you in the loop on any government rule changes.4 This can serve as the final checkbox to prevent any last-minute surprises in the rental process.
Tell your insurance provider
The final step is letting your insurance provider know that you will be renting out your basement. There is a possibility your policy may be voided if damage to your home starts in the basement rental without your provider having prior knowledge about your tenant.3
To get a quote for home insurance from an OTIP insurance broker today, call 1-888-892-4935. To review your current OTIP policy, call 1-888-494-0090.
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CBC – What you need to know about Ontario’s new standard rental lease
News Canada – Thinking of renting your basement suite? Tips for first-time landlords
Centum – Thinking of renting that basement suite? Tips for first-time landlords
CPA Canada – Why a rental unit in your home is not as simple as it sounds