Income Property: Planning for a basement apartment
With real estate prices booming, requests for basement apartment renovations are in higher demand. Home buyers are looking for ways to offset the high cost of their home and generating income from a legal basement apartment is a great way help with the mortgage while also increasing the value of the home.
Before you can get started you’ll have to figure out if your home will meet the requirements to have a legal basement apartment, what specific renovations features you will have to include to create the apartment and how much it will cost.
Here is what we think you need to know about basement apartments:
***(All of this is based on permit requirements for Guelph, Ontario. Be sure to check the requirements in your municipality before you proceed)***
Before you get started building your basement apartment renovation you need to know if your house will meet the permit requirements for a legal second unit.
A third parking spot for the tenant is the first item we ask when a client is interested in getting a quote for a basement apartment. Street parking does not count.
Our municipality requires that the 3 parking spots not all be in a line. The rationale behind it is, the tenant has to be able to come and go without having to ask someone to move their car. If you have a single or double car garage that is included in your parking spots requirements.
If you don’t have 3 parking spots, you’ll have to add one. It goes without saying, adding a parking spot will add cost.
Tenants need an independent access to the apartment. The reason being, they shouldn’t have to go through the home owner’s house to get into their apartment.
The three scenarios we run into the most are:
There is a side door that leads directly to an existing interior staircase to the basement for the tenant to access the apartment.
The basement is a walkout and the tenant goes around the back of the house to get in.
There is a man door to the garage that leads to a door to the apartment. The garage door itself does not count as an independent access to the apartment.
If you don’t have an independent access point, you’re adding one and that increases cost.
All legal basement apartments need laundry access either as shared laundry with the homeowner or independent laundry inside the basement apartment.
Shared laundry facilities has to be in a space both the homeowner and tenant can access without having to go through the other’s living space. For example, the homeowner can’t go through the tenant’s living room to get to the laundry facilities or vice versa.
The laundry needs to be in a space between the two units.
If you need to add a laundry keep in mind that it needs waterlines, drains for the washing machine and venting for the dryer. If you can’t find a location for the laundry that is its own independent laundry room within the apartment here are 3 laundry locations to consider if the space allows. In order to maximize space in the apartment, consider using stackable washer and dryers.
Bathroom: Incorporating a laundry closet in the bathroom is a viable option since the plumbing is already in the area and you will be venting the bathroom fan as well.
Kitchen: This is not your ideal location for a laundry closet but the reason it’s an option is because the waterlines, drains and venting are already there for the kitchen.
Utility room: With this option, you may have more space for the washer and dryer and may not need to go the route of stackable units. However, it is difficult to finish a utility room and increases cost so it may remain a bit more of an unfinished, raw laundry room for budgetary reasons.
The egress window is in place as a secondary escape route for the tenant in case of fire. Ideally, the egress window would be in the bedroom in case of fire in the middle of the night but it doesn’t need to be. As per Ontario Building Code (OBC), the egress window only needs to be in the basement apartment to give the tenants means to escape if their primary exit is blocked.
There are also size and function requirements for the window and window well itself. These can differ based on your municipality. Here is a link to City of Guelph Egress window requirements as an example https://guelph.ca/wp-content/uploads/EgressWindow-January2018.pdf
As per OBC, a homeowner requires access to the tenant space from the interior of the home. This must be done with a fire-rated door (remember, fire is bad).
A fire-rated door is typically special ordered and can not be altered in any way in order to maintain the manufacturers fire-rating. If you alter the door, and there is a fire and the door was altered your insurance now has grounds to potentially contest any claim because the apartment was not built to meet current building code requirements.
This means the door will have all the hardware (hinges, door handle, etc) pre-drilled and machined before it arrives. In our municipality (Guelph, ON) the fire-rated door can be no more than ¼” from the finished floor and can have no more than an eighth of an inch reveal all the way around it.
The door jam cavities must be stuffed with mineral wool insulation. The door jams have to be screwed in with 4” screws every foot and we put a 4” screw in every hinge as well for good measure.
The door also requires a door closer so that it shuts automatically every time you open it. We use the self-closing hinges. They are worth the extra money, work great and look better than the typical door/wall mount closers available.
Getting the building permit
As mentioned earlier, legally registered basement apartments are worth more than ones which are not. Here is what is required for getting a building permit:
Floor plan drawings of the entire house as well as the proposed basement apartment are required in order to get permit.
There is a small loophole in our municipality that allows homeowners to make their own drawings for permit. This means the homeowner accepts all responsibility and liability for the drawings but it isn’t quite as dramatic as it sounds.
The municipality’s main interest with a building permit is having the project build to fulfill the Ontario Building Code. They don’t care about the paint color or floors you pick. All they care about is that the renovated space is built properly and meets OBC standards.
My experience has been that if you are putting the effort in to get things built properly, the people at the City of Guelph and other municipalities we’ve worked at want to help you do that.
If you don’t want to do your own drawings, you will need to have professional drawings done by a person or company that has a BCIN number, which is a certification for designers with accredited building code knowledge.
Translation: you have to pay a certified professional to come and measure your entire house and produce technical drawings of the existing house and the proposed basement apartment to conform to OBC standards and use those drawings to apply for permit.
On top of your permit fee you will have to pay a non-refundable second unit registration fee. If you’re denied permit for the basement apartment, you can get the permit fee back but not the registration fee.
A lot of the requirements for legal basement apartments are based on fire code and keeping the tenant safe. We have already discussed egress windows and fire-rated doors but there are a number of other items. Remember, fire is bad and everything is in place for this reason.
Here are some tips to consider when renovating a basement apartment:
Do your homework
Before you go building the apartment, be sure to research how much rent you can charge in your area, how easy or hard it will be to rent your basement apartment and what your budget/cash flow situation will be.
We recommend talking to a real estate agent or a property management company about these things on top of doing your own research. They will be able to tell you what to expect in terms of rent you can charge, what types of tenants you are likely to get and how easy/hard it will be to rent it once you are complete.
In Guelph, there is a huge student population because of the university so end of the school year is when renters usually turn over. Although, in different areas of town you woul dmore likely be renting to an individual or a young couple but a real estate agent or property manager will know what’s best in your area.
A real estate agent or property manager can also help you in the renovation planning process to tell you what features you should or shouldn’t include in your project to get the most bang for your buck. This leads us to a very important point which is...
DON’T OVER RENOVATE
Do not make the mistake of making this basement apartment your own personal design portfolio. Keep in mind this is about adding income not getting your own show on HGTV.
Make it nice. Make it functional. Invest in good quality products which are low maintenance. Don’t get fancy.
Just because you can put in a gas fireplace and a sauna doesn’t mean you will get that money back. Again, a real estate agent or property manager, sometimes a good contractor, can help you maximize your renovation dollar with the right finishes.
Focus good quality products with a strong warranty and long life-span. The main reason is you want the space to make you money, not eat up your time repairing cheap things the tenant broke because you wanted to save a few bucks on finishes during the renovation process.
Luxury vinyl flooring (Glue down version)
This is not your grandmother’s vinyl flooring. It’s a much nicer product than you think it is. This flooring is designed to look like wood or tiled flooring, has a texture and is installed as individually glued down pieces.
It’s ideal for concrete floors and great for rental properties for two reasons:
It’s waterproof so it can go in the kitchen and the bathroom seamlessly.
If a tenant damages a piece, they can be replaced individually very easily. (Remember how we were talking about low maintenance earlier?)
Kohler shower unit
The Sterling Kohler units are much nicer and more functional than their competitors. The units come in a variety of sizes and they are made a of vikrell. Vikrell is more durable than regular acrylic shower units and it doesn’t go yellow over time.
We’ve put in dozens since 2013 and have gotten one warranty call. This continues our theme of keeping your apartment low-maintenance and just collecting cheques every month.
Side note: Go with a shower curtain rod and not glass shower doors. They are expensive and too higher maintenance.
When you’re designing the space, be sure to work out as much storage space as you can. It’s an added bonus in the space, makes the apartment more appealing and may allow you to charge a little bit more in rent.
Try to avoid being trendy when it comes to kitchens, and even bathrooms for that matter. If you plan to rent this over years, going with a classic look like white cabinets and a subway tile backsplash is a good option.
Go with basic, good quality appliances and laminate countertops. The goal of combining quality products and classic design means it will stay relevant and low-maintenance for as long as possible.
If you’re contemplating an Ikea Kitchen for a basement apartment, check out our previous article entitled Ikea Kitchens: the good, the bad and the ugly.
Basement apartments are a great revenue source for your future. But stay practical when you get started.
1. Permitted, registered basement apartments have more value than non-permit, non-registered ones.
2. Do your homework on who your rental market will be and a real estate agent can help.
3. Don't over-renovate unless you already have a show on HGTV
4. Every municipality/county/city has different requirements but they all know fire is bad.