When I started investing in real estate I did one of the smartest things I’ve ever done. I purchased a house, moved into the basement and rented the main floor. It wasn’t roomy, and it definitely wasn’t luxurious, but the nine years I spent doing it set me on a path to financial freedom.
For any investor who has a secondary suite in their basement, I highly encourage you to seriously consider moving into the basement so that you can rent out the top floor and make more money. When the basement renovation is done right, you can still have something stylish and comfortable, while at the same time maximizing the profit from your investment.
The Pros of Living in Your Basement Apartment:
You Can Charge a Higher Rent
In almost every case of a basement suite versus a main floor unit you can rent the main floor for a higher price. In some cases – particularly if it’s a main floor and second floor unit – you can get as much as double. How’s that for a little extra money in your pocket?
Charging a Higher Rent Allows You to Pay Off Your Mortgage Faster
When you live in the basement and rent the top floors, not only are you making a little extra money, but you can actually save more by paying off the mortgage faster. You can use that cash to increase your mortgage payments and save yourself thousands in interest over time.
Basement Can be Beautiful, Too
Basements have gotten a bad rap, and people tend to make assumptions that they’re dark and depressing. I’ve spent a large portion of my career trying to prove this isn’t the case. Basements that have been properly upgraded can be light, bright and spacious. And if it has a walkout to the yard, there’s almost no difference between a basement and a main floor.
It’s Not Forever
If you like living in basements, and if you’ve got a good one – great. If not, you can comfort yourself with the fact that this living arrangement isn’t forever. By sacrificing a little bit now, you’re setting yourself up for a much better situation later.
The Cons of Living in Your Basement Apartment:
It’s Noisier Than a Top Floor Apartment
The basement tends to be the noisiest part of the house, so make sure you’ve got the appropriate sound separation (two layers of loosely packed Roxul in the ceiling is my preference). You also want to screen your tenants carefully to make sure they’re not the type to make a lot of noise.
The Ceilings Are Often Lower in a Basement
In most cases the ceilings in the basement are lower than those upstairs. While there are certain building requirements that ensure they’re not uncomfortably low, it can still sometimes be awkward for taller people.
You’ll Have Less Natural Light to Enjoy
There will always be egress requirements that ensure a certain number (and size) of windows, however the chance you’ll get as much natural light as upstairs is low. Every unit is different so this isn’t always the case, but be prepared for a slightly darker environment.
You Won’t Have Access to Your Home Through the Front Door
If you decide to live in the basement you’ll need to be prepared to see other people using your front door. Normally the main floors have access and the basement has a side entrance. While this really is not a big deal, some new homeowners have difficulty with it.
Income Properties 101: Scott McGillivray divulges the most common mistakes landlords make.
Living in a basement apartment and renting out a top floor isn’t for everyone, but it certainly comes with its fair share of pros. If you’re facing this decision, carefully weigh the pros and cons, and how much each means to you, and make the real estate decision that’s right for you.
For more helpful tips from HGTV Canada’s real estate expert, visit the Scott McGillivray host hub.