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4 Drawbacks of Renting Out Your Basement

The money might be good, but think about what you’ll be giving up.

[Updated: Feb 04, 2021] Oct 30, 2019 by Maurie Backman
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In some cases, having a basement opens the door to a solid income opportunity. If you’re willing to have a tenant live in your basement, you can generate a steady stream of rental income. That income can help you pay off your mortgage, cover your home maintenance, or save for other milestones.

Renting out your basement might seem like a good idea in theory. But there are certain drawbacks you might encounter along the way. Here are a few negatives to be aware of.

1. You’ll have less privacy

Do you have a well-insulated ceiling between your basement and lower level? If not, having someone live down there could strip you of a fair amount of your privacy. Your tenant might overhear conversations and you can bet they'll know when you’re coming and going.

If that doesn’t bother you, go ahead and rent out that space. But if you value your privacy more than that, you may be better off not having a stranger live under your roof.

2. You’ll lose out on living or storage space

If your basement mostly tends to go unused, it could make sense to rent that space out and make some money in the process. But if you’re used to having your basement available for storage or additional living space, bringing in a tenant could force you to make changes that don't sit well in the long run.

And if you’re unable to find a home for the items you once stored in your basement, you’ll incur the cost of a storage unit or you’ll have no choice but to throw items away.

3. You might spend a lot of money getting your basement up to code

Renting out a basement isn't the same thing as renting a spare floor or apartment. You'll need to adhere to local regulations to make your basement a legal living space. The exact laws depend on the state or city you reside in. 

First, check local zoning laws to see if renting out space in your home is even possible. You'll also probably need to register your basement with your local housing department. 

Furthermore, you may have to sink a fair amount of money into finishing your basement and getting it up to code. That could mean putting in windows or additional exit points, adding insulation or fireproofing material, installing smoke and carbon monoxide detectors, updating your electrical work, and waterproofing the entire space

Finally, keep in mind that basement ceilings need to be a certain height to qualify as rental units. Check your local laws to see if your space qualifies before spending money to make it renter-friendly.

4. You’ll have to deal with being a landlord

When you rent out space in your home, you become a landlord overnight -- and that comes with obligations. When things go wrong, you’re responsible for making repairs or addressing tenant concerns. That could put a huge strain on not just your finances, but also your time. 

There are plenty of good reasons to rent out your basement. But before you do, make sure you’re willing to give up a degree of privacy, storage, living space, money, and time. If not, you may want to look at other ways to generate additional income.

Remember, you can always invest in real estate, stocks, bonds, or a business and increase your cash flow that way rather than inconvenience yourself on an ongoing basis.

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