The unstable financial aftermath of the Covid-19 pandemic is still in effect for many homeowners. In the current climate, it is necessary to search for alternative methods of income. One popular way is to renovate a room or space and rent it out.
Even better – create this space during the build of your dream home and make sure you have the perfect place for a tenant to stay.
With a little effort and cash, you can generate income on an ongoing basis for years by building a revenue-generating suite.
Things to consider when building a revenue-generating suite
Make sure that you can rent out the suite. Check province and territory laws and seek approval from the homeowner’s association if necessary.
Find out about conditions, permits, regulations, or whether you need to comply with health and safety codes. The possibility is also there that you will need to obtain tax permissions.
You wouldn’t want to get reported to City Hall and not have the necessary paperwork.
Some of the minimum requirements include proper electrical wiring, having smoke and carbon monoxide detectors, and enough fire exits among others.
The very first decision that needs to be made is: How will the suite be primarily used? Will the suite be rented out per month to a tenant? Or will it be a suite that is rented out to visitors in the area? Once this decision has been made, it will determine how big the suite will be, and which amenities will be included (for example a kitchen or kitchenette).
Remember to think about the area – are there many tourist attractions that can ensure constant and stable guests? Or is there a lack of decent smaller housing options for local residents?
3. Size and layout
Once the purpose has been determined, the next factor to consider is the size and layout of the suite. Whether you go with a bachelor suite, a one-bedroom, a two-bedroom, or bigger, depends on the space and finances you have available.
Building the suite from scratch, along with your home, provides endless options.
Also read: Reduce the carbon footprint of your new home
4. Placement and privacy
The options include having the suite attached or separate from the main house. A suite that is attached to the house provides easy access and convenience, although a separate suite provides more privacy for both the homeowner and the guest or tenant. Consider adding extra insulation if the suite is in the basement or attached to the house.
5. Renting price
Once you know what you can offer, search for similar suites in the area and see how much is charged for them. Find out if a flat fee for utilities is charged and what conditions are provided, or whether utilities are split by both parties. This will help you to set a fair price.
6. Renting contract
Always have tenants sign a lease. Stipulate boundaries about pets, noise, smoking, housekeeping, and payments. Also, include the length of stay and any penalties for not paying on time or not following the rules.
You can either have a specific contract drawn up by a lawyer, or you can search for a general renting contract and make the appropriate changes.
Do a walk-through of the suite with the tenant before they move in to document the condition of the suite and note any damages.
Also read: 10 Tips on How to Budget for Your Build
Something to remember is to have an emergency fund or bank account with a large amount of savings stowed away in case something breaks.
At the end of the day, you should be able to imagine yourself living or staying in the suite. If you can do so, you are ready to find a tenant or guest.
Advantages of a revenue-generating suite
- It adds value to your home in terms of an income-generating opportunity
- Ongoing extra income
- Good return on investment
- You will be able to pay off your mortgage quicker
- Having someone in the house or on the property when you are away
Disadvantages of a revenue-generating suite
- Ongoing repairs and maintenance
- Increased insurance costs
- Strangers that pose safety risks and concerns
- Careless renters that leave doors and windows open
- Unwanted guests (family and friends of the tenant)
Creating a revenue-generating suite within your build will add extra income and help to pay off your mortgage quicker. There are, however, many things to consider and take note of.
Also read: The Cost Per Square Foot Myth