11 -Maximizing Your Rental Income with Accessory Dwelling Units: Tips and Tricks
In this episode of Get Real Wealthy Season 4, Quentin D'Souza shares everything you need to know about accessory dwelling units.
Quentin says that accessory dwelling units usually refer to basement suites, or when a particular house or duplex has another unit added to its footprint. He adds that a new bill, Bill 23, has been implemented in Ontario to increase the number of units in single-family homes. The bill enables the creation of additional basement units or garden suites, thus increasing the density of existing properties. As for what you need to look for in accessory dwelling units, Quentin says that being closer to major centers is important to obtain higher rents, which could result in a larger net operating income for the asset. However, this may be offset by higher purchase prices.
Quentin recommends looking at places like Peterborough, Belleville, or Kingston where you have a lower purchase price but similar rents. He further adds that you also need to be cautious when inheriting an existing tenant on a property to be purchased. To ensure the legality of the rental, a tenant acknowledgment form should be obtained and the legality of the suite should be verified before purchasing. If the accessory unit is illegal, it may lead to complaints from neighbors, and the unit may be shut down, resulting in a loss of rental income and potentially affecting the property's maintenance and cash flow.
He further adds that when looking for basement suites, you should also look at the amount of natural light going into the bedrooms and living room. This is important as it can help one forget that they are in a basement. In the suburbs, it is necessary to ensure that each unit has at least one parking spot and public transportation nearby. Having separate entrances and laundry facilities for each unit can reduce tenant interactions and lower management issues. Quentin further suggests that including a bathroom with a tub in the basement is a great idea as it provides more flexibility for different tenant profiles.
Quentin adds that when considering a basement suite, it's important to think about small upgrades that can make it more attractive, such as lighting and flooring. These details can affect the overall appeal of the unit. It's also essential to ensure good color combinations and sufficient lighting to prevent the space from feeling smaller. In conclusion, he says that the top priority should be to have a positive cash flow every month after all expenses, including mortgage, insurance, utility costs, property tax, maintenance and repairs, and vacancy, are accounted for. This will ensure the property continues to appreciate in value while generating income..
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