7 Things to Consider if You’re Thinking About Renting Out Your Basement


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The cost of living has spiked in the past year. In order to keep up, people all across North America are assessing how they can cut back on spending or make extra income. 

Becoming a landlord may be an increasingly attractive and viable option for those who have basements in their homes. While the thought of inviting a stranger to live one floor below you can be a little unsettling, the extra income you will have coming in will enable you to live more comfortably (or pay off your mortgage in less time). 

However, before you advertise your vacant space for rent, ensure you know what your responsibilities are as a landlord, and how much this endeavor could cost you. Below are 7 things you need to know if you are thinking about renting out your basement.     


  • Make sure it’s legal

Just because you have a beautiful finished basement available doesn’t automatically mean you can lease it to someone. Not all counties allow for basement rentals, so check your local laws first.  

In most cases, if it is legal, you will need to meet specific safety and health codes, and possibly obtain a permit and/or tax permissions. 

Many local laws will be shaped by the International Residential Code (IRC). This code sets the standards for living spaces, and stipulates that a room, other than the kitchen, must have a minimum of 70 square feet for it to be deemed habitable. Note that the code does not apply to the full space of a studio apartment, but your city may have its own minimum square footage requirements for apartments The IRC’s minimum ceiling height for a basement space to be considered habitable is seven feet.

In some cities, a legal basement apartment must have its own door to the outside, as well as a second exit option (a window) in case there is a fire.  

Here’s a concrete example of basement apartment requirements set out by Newark, New Jersey. A basement may be used for sleeping, cooking and eating purposes if:

  • All applicable provisions of the ordinances of the city and state hotels and multiple dwellings laws are met
  • There is an available exit to the exterior of the building from the dwelling unit or rooming unit through two accessible doors. One may provide direct egress into a common area, hall or corridor which has an accessible door allowing direct exit
  • There is a fireproof partition or wall completely separating any boiler or furnace unit from the dwelling or rooming unit

Once you have confirmed that renting your basement to a tenant is legal, consider talking with an insurance agent to find out if you need any additional coverage for the rental space. 

  • If you’re in an HOA, there might be rules about leasing rooms to tenants 

HOAs have plenty of rules in order to keep property values high and establish clear expectations for members. Perhaps unsurprisingly, many have rules that prohibit short-term rentals. However, California found that the rules being imposed on owners by a few HOAs were too stringent, and have mandated that condos and HOAs cannot place blanket bans on short-term rentals that span 31 days or longer. 

Furthermore, accessory dwelling units (ADUs) or junior accessory dwelling units are not counted as a separate interest, provided that the owner is living in one of the units. That means an owner could legally rent out the ADU to someone for a weekend, even if the association has placed a ban on short-term rentals. 

If you are in an HOA and your state has not made any laws that address short-term rentals, then you will need to check your governing documents and see what they say about leasing space to a tenant.   

  • Make sure it is inhabitable 

Don’t be that landlord that tries to rent someone a basement that is cold, dark and dirty. A landlord is required to keep their rental property in good condition, and regardless of where the unit is, it must have:

  • Sufficient heat
  • Working water and electricity
  • Weatherproofing to ensure water stays out

Further, the unit must be free from mold, lead and asbestos. Landlords who do not maintain their properties can be held liable, and may end up in court.  

  • Basements are susceptible to flooding

Waterproofing is not a simple job, but if you haven’t done it already, you’ll likely have to hire a professional to waterproof your basement.  

There are interior and exterior waterproofing solutions. Exterior waterproofing is much more effective, but costs significantly more. It involves excavating around the house to the full depth of the foundation walls, then installing a waterproof coating along with drainage panels that guide water away from your home. 

If your basement has leaked or flooded in the past, you will need to address the problem before you invite someone to live in it. 

  • Ensure you won’t suffer financial hardship if there is a prolonged vacancy  

The whole point of renting out your basement is to generate extra income – but make sure you have realistic expectations about how much you will truly earn. Furthermore, if you need the money to pay bills, then you need to consider what you will do if there is a prolonged vacancy. 

Experts recommend having a financial cushion that can cover at least six months of the costs of the unit, as well as a little extra for legal fees.

Homeowners that haven’t yet converted their basements into separate dwellings, but want to do so, should also conduct a feasibility study with a licensed general contractor to see how much it will cost and how long it will take for them to break even. While a basement apartment conversion could provide you with a small financial cushion, it requires a hefty initial investment. You might spend anywhere from $30,000 to upwards of $100,000 depending on the complexity of the work that needs to be completed.  

  • You’ll want to familiarize yourself with local landlord and tenant rights and responsibilities 

Even if you screen tenants, there is a chance you could run into problems with a renter. If this does happen, you’ll want to take the appropriate actions as soon as possible to either resolve the issue or have the tenant removed from your property. 

Become familiar with the board that governs landlord and tenant rights, as well as your responsibilities as a landlord. Experts recommend having a standard lease agreement ready to go before you advertise the unit.

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  • Be prepared for the work that comes with being a landlord

Being a landlord isn’t something that will take up all of your free time, but you may be required to solve problems or attend to an emergency at any time.Landlords are expected to advertise their spaces, show the unit to prospects, run background checks, establish fair but competitive rental prices, complete necessary repairs, fix the damage and clean up when a tenant moves out, and much more. It’s a lot of work! Also, if you have problems with renters, you can learn more about rental credit reporting agencies to ensure you are making an informed decision when it comes to choosing tenants. These agencies provide information on a tenant’s rental history, credit score, and any previous evictions or bankruptcies. This can help landlords make more informed decisions and protect their property from potential damage or non-payment of rent.

7 Things to Consider if You’re Thinking About Renting Out Your Basement was last modified: by