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It’s being called a rental Renaissance.
The number of apartment units under construction in Toronto this year hit a 25-year high. According to real estate market research firm Urbanation Inc., in the third quarter of the year there were 26 apartment buildings under construction containing more than 6,500 rental units. And now developers are proposing another 43 buildings with more than 10,000 units, with most of the construction slated to take place around the city centre. Though there are a few projects planned for places like North York and Scarborough.
North York by Doug
All of this comes as the city’s rental vacancy rate sits near 1.3 per cent and home prices continue to skyrocket. So a lot of people are being priced out of the housing market, but have few options when it comes to renting.
But there are some ways for homeowners to both help out the situation and help with their own mortgage payments.
Increasing the Value of Your Home
If you have the room, converting your basement into a rental apartment is a nice way to make some extra cash.
"It makes sense if homeowners need a supplementary income. It depends on the lifestyle they want to lead by taking on a tenant and sharing their space with someone. Vacancy rates [are] low, so the owner can command a decent rent,"
said Jamie Sarner, sales person.
Living Room at a basement apartment by Deann Barrera
Adding an apartment to the property will also likely increase the value of your home, though Sarner says that all depends on the unit.
"The degree of the increase in value is dependent on many factors which make each instance unique,"
Construction and renovation can be costly too, says Sarner, so make sure you take a long hard look and that the potential benefits outweigh the costs. Doing things legally and up to code can be expensive, not to mention the potential tenant issues and zoning bylaws.
Doing it Right
Before moving ahead with construction it’s important to contact your insurance company.
"When adding an apartment to a home, insurance companies need to be made aware as exposure has increased,"
said Sandra Cowper, personal insurance advisor.
"In most cases a rental surcharge and liability coverage is added to include the tenants. The tenants’ contents, however, will not be insured under the landlord or homeowner’s policy."
It’s a good idea to have your tenants purchase their own content and liability insurance, says Sandra Cowper, since liability insurance is a major concern for insurance companies.
If your rental unit isn’t up to code it could leave you liable in the event of something like an accident or fire. Making sure you meet all the standards and notifying your insurance company is the best way to protect yourself.
"If insurance companies are not advised of [the existence] of tenants, their coverage can be nullified and cancelled for misrepresentation,"
"In the event of a claim, it can also be denied depending on circumstances of [the] claim."
In Toronto, when building a rental unit the floor area must be less than the rest of your house. Some sort of fire separation must contain each unit from other rooms or areas. Walls between a common corridor and dwelling area need to have a 30-minute fire resistance rating. Suspended ceilings, wood paneling and non-rated ceiling tiles won’t cut it, though you can drywall and plaster walls and ceilings. There can’t be any exposed joists and ceilings must be continuous.
In Ontario your rental unit must pass an inspection from the Electrical Safety Authority before it can be legalized.
Beyond just your insurance company, Sarner says you should consult with a lawyer familiar with these types of transactions, as well as a fire marshall, city planning officer, and accountant. He also says it’s a good idea to
"interview contractors and architects like you were hiring them for your office or firm."
Also keep in mind that finding good tenants can be a challenge. Placing ads on places like Craigslist is all well and good, but it’s important to sit down and speak with potential renters before handing over the lease.
Speaking of leases, make sure you have one. A detailed lease protects both landlords and tenants, and should set out clearly what is expected from each party. Will the backyard be shared? Will tenants be allowed to park in the driveway or garage? Will utilities be included in the rent, shared between the renters and owners or paid separately? These are just some examples of what can be set out in a lease to avoid any potential awkwardness down the line.
Backyard Living Space by Maegan Tintari
Finding tenants you get along with can also help foster a sense of community as well. Adding friendly and respectful renters also increases the safety of your home as there are more chances someone will be home to deter any potential burglars.
There are numerous benefits to adding a rental unit to your home, but it isn’t for everyone, Sarner warns. It can be a good thing for homeowners depending on these criteria, but it’s important to weigh your options carefully. Still, with a plummeting rental vacancy rate and skyrocketing home prices, getting in on the rental market offers a lot of opportunities and in many ways it’s a landlord’s market.