Split level; section off to house hack?

Question

We have a split foyer.  No kids yet, just dogs.  We only live upstairs and only go to the basement for laundry.

Our basement is finished.  We would have to take half bath to full bath, section off split level with locking door (separate French door access for prospective tenant already); finish utility room by adding small kitchen.

We will need to put our own laundry upstairs.

Then it would be a full basement apartment (water access neighborhood, boat ramp, etc Annapolis, Md 21403)

Questions:

Should we pursue all those upgrades?

Should we Airbnb or long term tenant

What are typical laws we need to consider or restrictions

Any other major considerations we are missing?

Thanks!

Andrew Myers · Answer

@Keith C. We did pretty much the same thing with our split level house.  We spent about 8k to separate the upstairs and downstairs, put laundry upstairs, and a few other little things.  We also spend about 2k in furnishings.  We've had our unit on Airbnb and VRBO for the last two years - we're probably 90% occupied.

some things to consider:

- long-term vs short-term - short-term rental is definitely more "active" so be prepared to clean or manage cleanings by a 3rd party, also managing bookings, questions, and messages.

- Check your local laws and regs!  Taxes, zoning, etc.  Any HOAs too.

- If you choose STR - be very transparent about any possible noise disruptions, esp with the dogs.  We have two little kids upstairs, and we set those expectations up front (book at your own risk!).  Rarely any mentions of the noise.

- If STR - make sure your homeowner's insurance covers STR, many do not.

-  If STR just be ready for problem tenants, it's gonna happen!  But def take it in stride.  (at least they're only there for a few days).

- Two years in, we've covered most of our mortgage and recouped that initial 10k.  So definitely no regrets.  Don't forget the tax benefits on your primary!   This is a great way to make your house a true asset.

Happy to answer any other questions you might have.  Good luck!

Andrew Hemminger · Answer

Hi Keith,

I live in the same zip code as you and have been contemplating the same with my house.  We have two kids and a dog but rarely use a portion of the house that could easily be separated (and already has a second entrance).

I have 4 long term rentals and would love to make my primary an income producing property.  Only issue at the moment is convincing my wife!

Me and a few other BP members in the Annapolis area had an informal meetup for coffee last weekend.  We have another planned in Feb...let me know if you'd like to join!

Best of luck!

Andrew

Russell Brazil · Answer

In Anne Arundel County, they have a lot size requirement for Accessory Dwelling Units. Minimum lot size is 14,000 square feet, about 1/3 of an acre.

Travis Provin · Answer

Hey @Andrew Myers how exactly did you section off the upper and lower split? I am thinking of doing this exact thing with a split level that has a walk out basement. I'd like to live in the upper half and Airbnb the lower half but I'm curious on the best way to section off the two levels.

Valerie Rogers · Answer

Hi @Keith C., your home is certainly in a great area for visitors! We spent a lot of time visiting Annapolis when our son was at the Naval Academy. I think as long as there are no restrictions in your neighborhood you should go for it!

Especially since this is your primary home, with all of the restrictions that cities are slapping down on STRs. It seems that a lot of the restrictions are against properties where the host does not live full-time (which 100% of mine are) but STRs in a host's primary home are more acceptable.

One of our STRs is a split-level house in Lynchburg, VA, the city where our Alma Mater is located. We don't live in that house, though, it is strictly a STR property and our home base when we are visiting the area. It is a 4 BR/2 BA house, with 2 BR/1BA on each level.

*It already had an exterior door on each level (the front door leading to the upstairs level and a side door leading into the downstairs level) which was great. Each door has its own wifi enabled smart lock:

https://www.amazon.com/gp/prod...

I'm able to generate codes for each lock independently or use the same code for both locks for a whole-house booking.

*There is also a large parking area so there is plenty of parking even if two groups had more than one car each.

*The laundry area is in the basement, so we tell the upstairs guest that there are no laundry facilities.

*The thermostat for the whole house is located upstairs, so we told guests who rented the lower level to contact us if they needed the thermostat adjusted and we would take care of it with our Honeywell app.

*We put a back-to-back mortise code lock on the door at the bottom of the steps to the lower level to lock off the two levels (apartments) from each other:

https://www.amazon.com/gp/prod...

We only give the code to unlock that door to the people who rent the whole house. Apartment renters don't know the code so they can't unlock the door.

*We created a little mini-kitchen in the downstairs apartment like you would find in a hotel: a little mini-fridge with a small freezer and ice cube trays; a microwave; a coffee set up with coffee maker, individually packaged coffee, creamers, packets of sugar & sweeteners, disposable hot cups & stirrers. We also provide some tea bags & hot chocolate mix packets. (We provide the same kind of coffee service in the upstairs apartment.)

*After our first year when we knew that the house was not only paying for itself but making money, we took a big step and installed a system that would allow us to have a thermostat in the downstairs apartment. It wasn't a complete 2nd zone, but some kind of system that uses a diverter of some sort.

The system works in tandem between the 2 thermostats: If a command is given on one thermostat, the system starts working on that command. In the meantime, if a command is given on the 2nd thermostat, the system waits on acting on the 2nd command until the 1st command has been completed. Then some baffles in the duct work move and then diverts the air to the other level and the system then begins to work on the 2nd command.

We tell the guests how this works & inform them that while the system may not immediately begin to adjust the temperature in their apartment if it is working on an adjustment for the other apartment, it will eventually.

Because this was a new location for us as far as STR goes, we weren't sure what to expect. Lynchburg is not really a "vacation destination" but it is a college town (there are several) and our Alma Mater has recently advanced to FBS level in football so we expected an increase in visitors to the area especially during football season. Imagine our surprise when the whole house configuration turns out to rent more often than the apartments! It seems there are a lot of weddings and family reunions in the area. Who knew?  :-)

I think turning this extra space in your primary home into a rental opportunity is a great idea! Best wishes!

Russell Brazil · Answer

You just need to stay under the occupancy limit when you have roommates. In most places in Maryland occupancy limit is 5.

Keith C. · Answer

@Russell Brazil could I do the project and market as “rooms for rent”? AirBnb, etc...  I’ll be paying all utilities, etc?  Thanks

Keith C. · Answer

@Russell Brazil that’s a bummer; thanks for the heads up! Is there anyway people work around this? I.e, not do the kitchen area or just not market it as a separate space?  I’m very interested in knowing how I can be flexible to make the house hack work in some way... thanks!

Keith C. · Answer

Some excellent things to consider! Thank you all!

Theresa Harris · Answer

I agree with everything Andrew said.  Split houses are great for splitting.  It all comes down to how much work you want to do as STR are a lot more work.