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Make Sure Your Basement Apartment Is Legal and Registered (Retrofit)

September 1st, 2016 · No Comments · Accessory Dwelling Unit, ADU list, Basement rental apartments, Latest News, Rental Property, Retrofit

550 Heman St. Newmarket sold for $621,000 on August 21, 2016. It's a nice property, but the basement isn't registered

550 Heman St. Newmarket (Semi-Detached) Sold for $621,000 on August 21, 2016 (MLS: 3580179). It’s a nice property, but the basement isn’t registered with the Town of Newmarket

It’s A Smart Move To Buy A Property With a Basement Apartment That Is Legal and Registered 

More and more people are buying houses in Newmarket and the real estate market is hot. By buying in Newmarket you are getting home ownership in the fast growing GTA at a reasonable price and will see a lot of future appreciation.

Compare the prices for a detached or semi-detached in Newmarket when the average GTA low-rise (non-condo) price is now over $900,000. For this price you can still find a high quality property in Newmarket.  Either a property where you live in with a legal, registered basement apartment to rent out or a pure investment property.  Prices are rising fast and the time to invest is now.

There are are also a lot of good tenants here. These are the tenants you want: they pay on time and respect both you and your rental property. This is why many people decide to rent out their basement as a rental property to earn extra income or help cover your mortgage.

Make Sure Your Basement Apartment Is Legal and Registered (Retrofit)

The "N" plate show the rental property is registered and legal with the Town of Newmarket

The “N” plate show the rental property is registered and legal with the Town of Newmarket

In this blog we’re going to explain to you why it’s important to buy a property that has a legal basement apartment registered with the Town of Newmarket. This is also called a “retrofit” basement apartment.

We continue to see some real estate agents list properties that have basement apartments without telling potential buyers of the legal requirements for having an “income property” in Newmarket.

They say “you can rent out the basement apartment” without telling you that if you aren’t legal and registered you will have to go through a long and expensive process before you can ever look for a tenant. This is why the smart move is to buy a property that is already legal and registered.

Here are the key points to remember:

Newmarket landlords good tenants

(1) Good Tenants Love to Rent Safe, Legal Apartments.

It’s a terrific ‘selling point’ for good tenants.

This shows you are a professional and responsible landlord and you have a safe apartment. Meanwhile, illegal basements “turn off” good tenants and can lead to a lot of headaches for you with bylaw officers, neighbours, etc.

Newmarket landlords mortgage qualification

(2) An Existing Legal Basement Can Help You Qualify For Your Mortgage

You can also use the apartment to help you get easily approved for your mortgage. You can add the income from a basement rental apartment to get approved. But the rental apartment in the house you are buying must be legal in order for you to use it to help you qualify for the mortgage.

Newmarket money time value

(3) Buying a Property With A Legal Basement Apartment Can Be Put All In Your Mortgage And You Can Start Renting Out Your Basement Fast (and bringing in monthly rent cheques!)

Adding a legal basement apartment is going to end up costing you time and $50,000 or more. Who has $50,000 + after you put down your down-payment to buy a place?  If you have to go through the process yourself you will have to pay out of hand to do it.  If you buy an existing legal, registered basement any additional costs can be put into your mortgage. Instead of having to pay electricians, plumbers, drywallers, dealing with permits and approvals you can focus on renting your basement and making cashflow.

Renting Out Your Basement Apartment

It sounds so simple. You have a basement rental apartment and want to rent it out. The tenants see the place, like it, you sign a lease and then every month they give you a check or cash paying the rent to you. They key is to rent to all the good tenants out there.

What Are Good Tenants Looking For When Renting a Basement Apartment?

There are a lot of great tenants in Newmarket who want to rent a basement apartment.  These are the tenants you want to find. But if you want them to rent from you it’s important to know what they are looking for

1. Good Location in a Nice Neighbourhood

Remember, your tenants are renting out a place they will call home and they want to make sure they are in a good area. The area doesn’t have to be filled with two million dollar homes. Good tenants are looking to be near shopping, bus routes, schools and parks. It’s a great advantage for you if your rental property is not in a typical “rental area”. Good tenants like to be on a street full of homeowners who show pride in their property and keep it nice and clean.

2. Clean, Nice Looking Unit

Tenants often tell us how many ugly decrepit basements are on the market for rent. Good tenants like a property to be clean and new. 

3. A Two Story House Is Better Than a Bungalow

This is something many new landlords don’t know. Tenants prefer basement units in two-story houses better than in bungalows.

Why? It’s all about noise.

If you are living in a basement in a bungalow you have people living over you all the time. Even late at night they can hear people in the bedrooms upstairs. In a two-story house tenants know they won’t always have this happen and at night the people upstairs will be two floors up and not right above them. This leads to a more quiet environment for the basement tenants.

“Noise” is one of the most common complaints from basement tenants and the reason why many end up leaving basements in bungalows. Two story houses are winners!

4. One Bedroom Basement Apartments Are Better Than Two or Three Bedroom Apartments

This is also something many landlords don’t know. It’s far easier to rent a nice one bedroom basement apartment over a two or three bedroom. Why? Because most basement renters are just one person or a couple.

If they have more than one person they can put their money together and live in an upper unit. There are always lots of single people, or newly divorced people, or a newcomer to Canada, a young couple, or someone who just got a job in the area who are looking for a nice one-bedroom basement.

With a one-bedroom usually the rent is a little lower (so you have more people who will apply). You also avoid things like tenants arguing with each other that you get in bigger basements.

5. Safe, Registered, Legal Basement Apartments

We wrote about safe, registered legal basement apartments before and it’s just becoming even more important every year. Newmarket has a system to protect tenants (and landlords) where the house owner need to register with the town and prove the basement apartment is safe.

There is a process to make your basement apartment legal and registered. The process can be pretty long and costly.  

As the process can cost a lot of time and money we always recommend new buyers to only purchase duplexes that already have a legal basement apartment. 

This way you don’t have to spend months and thousands of dollars to get the basement apartment registered. If the property you buy already has a registered basement you save thousands and don’t have to pay out of pocket (instead of putting any expenses in your mortgage).

What Are The Benefits Of Having a Legal, Registered Basement?

There are many. Let’s look closer at some of the benefits.

(1) Attract Good Tenants

As we explained good tenants want to make sure they live in safe, high quality legal housing. If you want to find good tenants who pay their rent on time and respect you and your property you need your basement to be legal.

(2) Safety

A registered legal apartment will need to meet both fire code and electrical code. Whether you are living upstairs or you rent it, it’s important the property is safe.

(3) Increased Garbage Pick-Up

Properties with legal, registered units are allowed to put out double the normal garbage. This means instead of three bags you get to put out six. This is an important way to keep the property clean and good tenants appreciate it.

(4) Two Mail Boxes 

Tenants like their privacy. You get two mail separate mailboxes with Canada Post with a registered basement.

What Can Happen if your Basement Apartment Isn’t Legal and Registered?

Not having a legal basement apartment is like playing Russian Roulette. It’s just a matter of time before it costs you money and grief.

bylaw officer

You really don’t want to deal with Bylaw Officers. Make sure your apartment is legal and registered!

(1) Tenants Can Use This Against You

If you get into a tenant dispute and your basement apartment isn’t registered the tenants can use this against you.

(2) Neighbours Can Use This Against You

Some homeowners won’t be thrilled to having a rental property next to them. If you aren’t registered and legal they can report you.

(3) Mortgage

If your basement unit isn’t registered you can’t use this to help you get your mortgage.

(4) You Can Be Shut Down!

Do you want to be viewed as doing something “illegal” and could be shut down at any time and fined?

Make Sure Buy a House With a Basement Apartment That is Legal and Registered with the Town of Newmarket

The process to get a basement registered and legal can cost a lot of time and money.

To build your own basement unit you have to go through the bylaw department.

Even worse is if you buy a property that has an unregistered, illegal basement apartment. You will need to go through a long process with the fire department and the ESA (electrical safety authority) to try to get it approved.

Get ready to pay electricians to re-wire, change fuse boxes, etc. The fire department will demand a second exit (get ready to create a new door or large window as a new exit, breaking concrete walls and applying for permits), replace drywall, replace ceilings, add walls to the furnace room, add sprinklers, and more.

Let’s Look At a Recent Sold That Is a Good Rental (But Doesn’t Have a Legal, Registered Basement Apartment)

We written before about the importance of having a clean, fresh-looking property in a good area to find good tenants.

And not only will you be able to rent to the best tenants who pay their rent on time and respect you and your property, you will also get a lot of house appreciation.

550 Heman St. Newmarket, Ontario (Semi-Detached) Sold for $621,000 on August 21, 2016 (MLS: 3580179)

This is a three bedroom semi-detached near the Southlake Regional Healthcare Centre. 

It’s clean, in a great area, nice and new looking and has parking. 

The problem is basement unit is not a legal, registered unit. So if you want to rent it out you have to apply and it will end up costing you time and tens of thousands of dollars on top of what you paid for it.

Newmarket 550 Heman Street

550 Heman St. Newmarket (Semi-Detached) On Sold for $621,000 on August 21, 2016 (MLS: 3580179)

It’s got a nice clean front yard and parking for people upstairs and for tenants downstairs. It’s only one story, and we don’t really like these types of properties where they turned the garage into a basement apartment. But it’s clean and in a nice area.

Newmarket 550 Heman Street 2

The living room has a nice big window and is bright and clean and new looking.

Newmarket 550 Heman Street 3

The kitchen is nice and clean and fresh looking.

Newmarket 550 Heman Street 4

The basement is clean.

This is a nice property and will rent out to good tenants and will appreciate in price over the new few years.

You can live upstairs and rent out the basement. Or you can even rent both the upper and lower apartments separately and will be looking at bringing in at least $2600/month.

This is a nice property…the problem is the basement isn’t registered so you will have to go through the long process and it could end up costing you about $50,000 (or more). And you can’t put this in your mortgage, you have to pay yourself with your available funds.  

If You Are Buying a House With a Basement Apartment Make Sure It’s Registered and Legal

More and more people are buying houses in Newmarket. Make sure you buy in the right area, buy the right property and your basement apartment is legal and registered.

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