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Anyone else rent out part of their home or live in a duplex?
Old 07-26-2009, 01:59 PM   #1
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Anyone else rent out part of their home or live in a duplex?

I know several people who rent out their fully finished basements here in my town so as to help with their mortgages. Going rate is about $800 or so although some get more for really nice developments. They have their own separate entrances so you don't have to ever see the tenant and it works well for the people I know. Let's say you can get 10K per year...that effectively reduces the FIRE nest egg one needs by $250,000 assuming of course a steady source of rental income. These units are very easy to rent out where I live. Also for tax purposes this is not considered income since it would be ones primary residence (although property taxes go up a little if it is a legal suite).

Anyone here do this? I am looking at all possible methods to get passive income and this would appear to be a good one. When I bought my home in 2002 I almost bought one of these places with seperate rental suite in the basement. It would have been an extra 800X12X7 = 67,000 in my pocket if I had done so and I've been kicking myself for not doing it. I guess the only downside is that one may tire of only having 1/2 the house available, sharing a garage, etc.
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Old 07-26-2009, 02:10 PM   #2
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We do something a little different that puts some extra money in our pocket every year. Our small college town has a shortage of hotels during graduation and various sports events. To fill the need a group called bedfinders has sprung up. We are a member of this group. One person organizes it (and gets a finders fee). Our room basically serves as a hotel room for those weekends. We get $85 a night. It's not a lot of money every year, but it sure is easy.

My neighbor has a mother-in-law apt. They attempted to rent it for a while. After getting burned by two renters in a row they gave up. I don't think they checked renter references, so perhaps they weren't putting in due diligence to make it a go. Personally, I wouldn't like the idea of having to share my house like that. I'd rather buy another place to serve as the rental. I'm sure other folks can chime in about the hazards of that route.
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Old 07-26-2009, 03:01 PM   #3
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Also for tax purposes this is not considered income since it would be ones primary residence (although property taxes go up a little if it is a legal suite).
Are you sure about this? Wouldn't this be rental income and you would fill out the forms using values prorated for the amount of the total square footage being used for the rental?
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Old 07-26-2009, 06:34 PM   #4
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Also for tax purposes this is not considered income since it would be ones primary residence (although property taxes go up a little if it is a legal suite).
As a fellow Canuck, I'm pretty sure you're wrong here, check here , search page for 'Personal Portion' and it pretty much says it's taxable. You may be able to deduct some costs, but that may cost you part of your 'principal residence' exemption from CG taxes.

Edit to add:
I believe you don't have to declare income from a 'business' activity if there is little no likely-hood of making a profit. As an example, we own a condo in your city that DD lives in. Her sporatic rent payments are almost always less than expenses so we don't have to declare income and can't deduct losses against any income but rental.
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Old 07-26-2009, 06:46 PM   #5
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I see from your past posts that you have over ten years before you can retire. This is good because if you want to, you will have plenty of time to rent your basement and figure out the economics of it - - what rent you can get, what the expenses are, and so on.

You must really love your home. I would be tempted to sell it and buy a smaller, less expensive house instead of renting out the basement and taking on the job of being a landlord indefinitely.
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Old 07-26-2009, 07:47 PM   #6
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Are you sure about this? Wouldn't this be rental income and you would fill out the forms using values prorated for the amount of the total square footage being used for the rental?
I think you're right, but in certain provinces with high housing costs (read: BC = Bring Cash) there are many "illegal" basement suites being rented out "under the table".
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Old 07-26-2009, 07:53 PM   #7
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I didn't realize we were talking Canada so "nevermind." It's hard to believe the Canadian government doesn't want some part of any income you are receiving.
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Old 07-26-2009, 11:30 PM   #8
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Yea I'm in Canada. As for taxable income, you guys may be right, but the Capital Cost Allowance one could claim + other expenses should more than offset the income I would think. I just seem to remember reading that if you are renting just a "room" out in your principal residence that it is not taxable but I'll have to double check this.

This likely is a good idea in theory but I probably would not actually pull the trigger on it, although since I am aiming for a nest egg of 1.25M or so this would basically in theory reduce this 1/5th to 1M. That 250K would take several years to accumulate so it may be worth the hassle.
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Old 07-27-2009, 09:37 AM   #9
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I still want to know if you ended up wearing a Halloween costume to work.

When we sold our house we moved into a four-plex, living in an apartment which is 40% of the building size. We do not share the garage, but do have a parking lot for off street parking. I really liked it. It is an inexpensive way to live. We extensively fixed up our unit so it has been pleasant place to live. I do extensive flower gardening and I even could deduct a portion of my gardening costs. The walls and floors do not seem to distribute much sound so hearing the neighbors has not been an issue. Though we do tell people that we live here and expect quiet. We really vet the tenants because we do live here and never have had a tenant problem in this building.

The downside is being available to address problems, which makes it an issue when doing extensive traveling. So, I'd like to sell at this point. (We also over improved our apartment and will not recoup those costs).
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Old 07-27-2009, 09:42 AM   #10
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Where I live you would run into huge zoning issues if you rented out part of home in a single family area as an apartment. But I think you could rent out a room and be within the code. Anyway, something to check into, but if your neighbors are all doing it, it's either okay or overlooked.
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Old 07-27-2009, 01:05 PM   #11
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The downside is being available to address problems, which makes it an issue when doing extensive traveling. So, I'd like to sell at this point. (We also over improved our apartment and will not recoup those costs).
Could you hire a property management company for while you travel? Or is that not the only reason you want to sell? Curious, b/c your set up really intrigues me as something we may want to do in the future.
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Old 07-27-2009, 01:14 PM   #12
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It is the primary reason. Here is my worry. A few years ago we were gone for a month. Tenants could still call us if there were any problems. No calls. When we got home we found that a tub had overflown upstairs from us, and the water stained the ceiling, ran down some woodwork which ended up with stain marks. No one ever was there to look at our empty apartment. I don't think that a management company would help with that. Maybe it will never happen again but still . . .
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Old 07-27-2009, 04:46 PM   #13
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Regarding taxation of rental income in Canada--yes, it most definitely is income that should be declared, even if it is just for one room. Income is income.

You do get take deductions against that income, though, that you can't normally take for your primary residence, like mortgage interest, utilities, and homeowner's insurance. Most Canadians do not take CCA (depreciation) on their rental property because it's going to reduce their basis in the property when they eventually sell and be recaptured (taxed) at that time.

As was noted, the portion of your home that is rented out is calculated (usually by square footage or number of rooms compared to the total) and then the deductions that apply to the whole house are prorated accordingly.

On paper, renting out a portion of your home can show a loss for the year, even though someone is handing you a check each month.
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Old 07-27-2009, 07:44 PM   #14
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It is the primary reason. Here is my worry. A few years ago we were gone for a month. Tenants could still call us if there were any problems. No calls. When we got home we found that a tub had overflown upstairs from us, and the water stained the ceiling, ran down some woodwork which ended up with stain marks. No one ever was there to look at our empty apartment. I don't think that a management company would help with that. Maybe it will never happen again but still . . .
No, a management company probably wouldn't help with that, unless you paid them extra to do walk-throughs. We went away for Thanksgiving once and returned to water all over our dining room and leaking through the ceiling due to a slow leak in the upstairs bathroom. So it can happen with or without renters (except for the fact that I guess you can turn off the water in your house when you leave for a while).
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Old 07-27-2009, 08:15 PM   #15
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Yeah, it probably is a risk with any home, not just one with apartments sitting above it.
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Old 07-28-2009, 10:12 PM   #16
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can do even better.. You rent out the Address and a Room, but the renter never uses it.. They will put in a Answering machine and All you do is forward their Mail for them.. Nowadays don't even need a Ans. machine, they use Cell phone registered to your address..

an they pay you in Cash.. You can give a 15% Discount if they pay you in Cash..

Nothing Illegal either..My Renter needed a permement Address, but was traveling all the time .... and on his Free time was spent with a Girlfriend at her place.. or a Resort..

Bed & Breakfast works well too..If your home is Big enough..

Another Neighbor rents out a Camping space for Motor Homes and/ or trailers... It's just a Glorified Concrete Patio slab with Sewer/Water / Elect Hook up.. Although he does have a Full Acre.. so it's out in the back of his Lot..private for both sides..$20 Nite-$500/mo and a 5 min. walk to the lake..( Resort Area town )...again, it's Cash..

Another Neighbor, Bakes Cakes.. the Local Bakery buys all she can Make.. She gets $25 each for them, cost her $5..She makes 5 a day.. 30 a wk.. and Special order ones as well..she just Added another Friend to make Some as well, business is Booming..!
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Old 07-31-2009, 02:56 PM   #17
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can do even better.. You rent out the Address and a Room, but the renter never uses it.. They will put in a Answering machine and All you do is forward their Mail for them.. Nowadays don't even need a Ans. machine, they use Cell phone registered to your address..
hope you arent renting to a terrorist, sounds like something they might be looking for
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Old 07-31-2009, 03:14 PM   #18
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Sure, I know a guy that bought a 3 br townhouse and rented out the 3 brs to buddies/roommates and slept in the basement. It more than paid his mortgage and he only had to pay 1/4 utils. Not sure if he still does this as it has been a few years since I heard from him.

For me, I could never get anywhere near $800/mo for renting a room in my house. The house next door was rented for $950/mo for the whole thing (3 BR, 2 Ba probably), so I might get $400-450 max for a room with utils paid by me. We are set up to do this almost. 1 BR and a half bath have access from their own external door, with common access to the laundry room. No shower though so a little remodeling would be required.

But I'm not sure I'd mess with it for $400 a month, unless we knew we were going to be out and about a lot traveling. In which case it would be awesome to have a live in house sitter. DW would undoubtedly consider it an invasion of privacy, but I might not mind if it was a quiet grad student or professional or something.

To the best of my knowledge, our zoning laws don't prevent us from renting a room. I think they recently passed a law that bans permanent occupancy of a residential dwelling by more than four unrelated people. But renting to one or two individuals would not violate that rule, since my family is all related to each other.
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