All Forum Posts by: Roger Simons

Why not just do the math?  What are the room rental prices in your area?  Renting to 3 single people is usually far more lucrative than a couple or family.  Are there any other rooms you could rent out as well?  A basement?  The only reason you would convert back to a living room is if it was luxurious and is premium priced.  Doesn't sound like it is.  Let your calculator make the decision for you.  If you go ahead make sure you live close so you can be there fast if there are problems.  

Say you take your typical 3 br medium sized house that would typically rent for about $1500 and because of room conversion (like converting the living room/dining room/rec room/laundry room/den/etc) you now have a 6 br house and you're now getting double that and have months of proof of that.  Or years. 

Would an investor pay much more for this knowing you've just cleverly managed the space and the house itself really isn't much different from when you bought it?  

What about a bank?

Would anyone value it more for the revenue?  Isn't that what people buy businesses for in the first place? For instance in my area that typical 3 br house would sell for about $250,000.  And it would rent for about $1500.  And rooms here rent for about $500.  6 x $500 = $3000 or $36,000/annually.  At a 10% cap rate (omitting expenses which would be mostly shared) that $250,000 house is now $360,000.  Isn't a 10% cap rate particularly generous?  Wouldn't most investors jump at that?  I hear banks just look a appraised value which seems particularly short sighted.  Maybe other lenders loan on revenue more?

For a bathroom use a chemical camping toilet they can empty in the house once in a while. 

For the kitchen you need to know exactly how they define a kitchen.  Doesn't sound like you know yet.  Once that is determined you may be able to provide some cooking facilities but not enough to infringe on their silly rules.  

You might be able to rent it as a workspace or work studio.  Many people have small cooking facilities in their workspace at their office, right? 

Another option is really unorthodox.  It involves sleeping in a vehicle or trailer so they are legally not "living" there.  The trailer could have a kitchen and bathroom as well.  Even a tiny one.  If you live near a gym with nice showers all of this could be so much easier.

At least you live in a mild climate.  That offers so many more possibilities than if you lived up north.  I wonder if a nice tent would work.  Then a lockbox or security cage for valuables, anchored to the ground somehow.  How are your neighbours?  Will they rat you out the second they suspect anything unusual?  Some people are so petty.  These are almost always people that never get good ideas themselves so they have to tear down the ideas of others. 

Its so strange how rental demand is so high in most parts of North America yet everywhere they seem to want to restrict the creation of new units.  Probably if people that made the rules weren't allowed to engage in real estate business or rentals, we'd get a lot more flexibility and logic.  Prices too high?  Let'em build/renovate/subdivide/maximize their square footage!  That would be too logical.  

Say a typical 2 br house goes for $250,000 and rents for about $1500 in a low priced area.  You look at the layout and convert the living room, dining room and laundry room into rental rooms as they all have opening windows.  The LR and DR are much larger than the bedrooms so they go for quite a bit more.  The rooms are renting for say $400 & $450 for the 2 bedrooms, $600 for the LR, $550 for the dining room and $400 for the smaller laundry room.  So now its pulling in $2400.  Quite a jump.  Then you renovate that dingy basement and get 3 small rooms rented down there at $400 each.  Now we're at $3600.  My point is if we vastly increase rental revenue will the bank significantly increase the loan value it will allocate to us?  (And we can show several months of consistent revenue at these high amounts of course.) 

When we end up selling it, surely it would sell as a revenue property with that much revenue, right?  Being this is unconventional you'd have to raise the typical cap rate.  So let's say 10%.  That's pretty generous.  $3600 x 12 = $43200 x 10 = $432000, a huge profit from $250,000.  I know I'm winging the numbers and there are many other expenses but we're just talking generally here. 

What about refinancing it?  Will most banks ignore the revenue and just look at a general appraisal value for similar homes in the area?  I want to find a lender that looks at the money the property is pulling in, not me so much.  (My credit report is excellent but right now I have little income, just a lot of savings that I have invested in other things but it is quickly accessible in the event of an emergency.)

And if nobody is willing to reward me for my ingenuity in vastly raising the rental income I guess I just enjoy that rental income (with all its dreadful taxes that accompany it).