Today we have a guest post, I hope you like it!
One of the smartest things I did immediately after buying my first home was renovating the basement and renting it out. Here are a few things I learned along the way.
First off, your home is a black hole that will suck up every dollar you have if you’re not careful. We’ve been so brainwashed by Home Depot and home improvement shows that it’s essential to our lives to replace every piece of flooring, re-do every bathroom, and completely remodel your kitchen.
Before you convince yourself that’s necessary, take a deep breath and decide what your real priorities are. If you’re smart, you’ll use that home renovation money to start producing income right now.
It’s important to understand what renters want. In my city most basement apartments are dark, dirty, and disgusting. People expect this, so when they open the door to mine and see brightly colored walls and lights everywhere, they’re surprised and happy. It doesn’t cost any more to paint a room a happy color than a drab one, so do that.
Now the obvious – getting a monthly income for doing almost no work is amazing. The average mortgage payment is around $800 – $1,200 a month. It’s actually possible to have someone else making the majority of your mortgage payment.
Even SMARTER is to pay twice as much towards your mortgage – both your regular payment and the rental income as a lump-sum payment every month. This is the true road to owning your home sooner.
The next benefit is taxes. In the U.S., the interest you pay on your mortgage is tax deductible – a huge benefit. In Canada, this isn’t the case unfortunately, but if you rent your basement, a portion of your interest (the same percentage that your basement is of your house) CAN be deducted. This is because you’re running a business and that interest counts as part of the operating expense.
Similarly, you can claim a portion of your utilities, cable, internet, and maintenance work.
A lot of people are hesitant about the idea of having someone live in their home. Of course you have to be diligent and careful about who you rent to, but I’ve found as long as you treat your tenants like good people, they’ll behave like good people. Realtors can help you find a reputable tenant.
Buying a home can be a scary prospect. There are a lot of unknowns and a lot of things that can potentially go wrong. At the same time, if you’re in a position to be able to buy, it’s something you should really think about.
If you are searching for current mortgage rates in Canada, you’ll see that interest rates are still ridiculously low. Locking in to a low rate will save you thousands over the life of your mortgage. Combined with rental income, you’re well on your way to owning your home faster than you ever thought possible. Check out www.mortgagerates.ca for current rates and other tools to help you calculate what you can afford.
Have you ever rented out your basement or any part of your house?