Basement suite in own house?

Question

Hello All, I'm New to this web site, it is a GREAT site. Im always thinking realestate 24/7.

Heres my first question.

Should i put a suite in my basement To start my REI career?

I own my own home and have been lucky enough to make over $200 000 in equity. What im thinking is rent out my basement to help payments. Then i can try and find a re hab to fix and sell.

Is it worth putting an illegal suite in basement ( the house has a great layout for basement suite.)

Any advise or comment are appricated.

Matt H · Answer

And what will you do when you get an "ex con" living in the basement who knows that the rich land lord is right upstairs from them? He knows when you leave and knows what your daily routine is like, so he sneaks into your house in order to eat your ice cream and pickles.

Matt H · Answer

You might have to look in other cities/towns/states . I have to these days in order to find anything that cash flows. So I look out east, and I had to fly out there a couple times now to look over things. Never thought I'd be doing that. And at first it seemed way out in left field but now I'm totally comfortable with it. Because really when you think about it, it's only a minor inconvenience to have it located far away. Airfares are pretty cheap these days. Even if it was local, if you use a property manager you'd probably rarely go down to see it anyway. The last time I went to see my building here in the city was about two or three months ago I think.

Matt H · Answer

That's the whole thing about rentals. If you buy a property that's say for example a house that you plan to rent out. What you got to ask yourself is, "how many units could I break this up into". By doing that you not only make a lot more money but if for some reason someone can't pay rent you still can likely make your mortgage payment because the rest of the tenants will. But with just 1 tenant, if they lose their job and can't pay rent then you have to be the one to pay the full mortgage payment. My friend has a small house. What he did was make 3 bedrooms in the basement. Inside each bedroom he installed a tiny kitchenette. Then the floor shares on main bathroom. Then he rents out each unit often to university students as it's near the school for about $500 per month. Where as a normal bachelor is starting at about $600. So he has no problem filling those rooms. Then he rents out the entire main floor for about $1200. Alternatively he could rent out the whole house for about $1500 max. So you really ought to try and maximize the space if your plan is to hold it. If your plan is to flip it in a few months to a year, to a family then maybe do the same thing but don't bother put in the mini kitchenettes. But I think it's a great way to get started.

Mark Beekman · Answer

Roscoe- The difference is that if you rent out a suite in your basement, the creepy tenant is right downstairs and knows all of your comings and goings. If you own a rental property that you don't live in, who cares if the tenants are creepy as long as they pay rent and don't wreck the property. If a guy is cooking meth and blows the buiding up, I assume you'd have insurance to cover it.

N/A N/A · Answer

Fair enough that makes sense. Do you think it is a waste of time to split a rental property into a upstairs and a downstrairs to increase cash flow. Rent out both for 2100 a month wear i could get 1500-1700 for whole house rental.

N/A N/A · Answer

So if i have to worry about a tenent that will break into my part of the house how can i get into rental biz and trust any tenants of any house i rent out. R2 how do you sleep at night knowing that in your huge empire of apartment buildings theres probably someone cooking oil from the weed they grew...down the hall is the ex con smoking crack and possibly burning your whole future. If i cant trust the tenent i bring into a basement suite i think i better think twice about getting involved in rental part of REI. Maybe rehabs are the better way less human factor

Matt H · Answer

Tenants and owners should never live together. As an owner you're at risk because you don't know what the tenant may or may not have in their history. Or what kind of people they are friends with that they're going to be bringing into your house. But also the tenants don't like it much either because they can't be themselves because they're always worried because they have the owner looking over their shoulder continually. So they can't turn their music up, they can't stay up late and all kinds of stuff without fear of having you hear them and not like what they're up to.

N/A N/A · Answer

I Appricate all advise but Im Starting out small and working my way up to trump status. My original question was about a basement suite. Is it worth making my first house into an up/down split with the possibility of renting up and down or living up and renting down to start. My original plan is to put a suite in the basement rent it out for 750 includes utillitys. Upstairs i could get 1500 easily While my mortage is only $900 per month. Then i will use my Equity to purchase another house to rehab and sell for profit hopefully if purchased right. Any thoughts if this is a safe start heading in the right direction? I always want to hold properties long term if possible is this a good plan? Thanks for all the help sorry about spelling

Matt H · Answer

Ya you should have a safety net too. So if you can keep maybe 10 or 20 in a reserve that would be good. Maybe you could just set up a line of credit with a bank too as a fall back. Or get the limit on your cc increased.

Mark Beekman · Answer

Thanks once again, R2. What about having a safety net of cash on hand for the unexpected, though?