10 Reasons To Hate Basement Apartments

December 28th, 2010 · 41 Comments · Personal House, Property Management, Rental Property

This is the easiest post I’ll ever write.

  1. Rarely Legal
  2. Worst Tenant Demographic
  3. Lowest Income Tenant Demographic
  4. Worst Credit Profile Tenants
  5. Fire Code Issues
  6. New Landlords
  7. Utilities Sharing Problems
  8. High Turnover
  9. High Vacancy
  10. Weird Layouts

The source of all evil is probably a basement apartment. They are the source of landlord/tenant issues when the landlord lives upstairs or tenant/tenant issues when another tenant lives upstairs. If there’s pot smoking in your apartment 90% of the time, it’s wafting up the vents not down. Deadbeats love the damp it or just the smell of unsophisticated landlord that lives upstairs.

Tenant Demographic

If you can explain to me why a tenant in his or her right mind would rent a basement apartment when they can rent an apartment in a building for the very same price or lower, I would love to hear it. Because they like the dark? or the sound of running feet overhead? Generally it’s because of the price or they can’t get approved in a building because of their nasty credit, poor work history or some other problem.

Cash Flow… Blah Blah Blah

I get it, you need the money from the basement apartment or do you really? By the time you add in the risk from the utilities problem and minus your split from the rent or add in the time spent chasing the money from the basement, is it really worth it? Plus here’s a secret, a whole house attracts the very best tenant profile of all. There are many people out there who don’t like to share their space or have had to move because of these tenant conflicts who want a whole house.

Hardest Properties To Manage

It’s the tenant/tenant issues that will drive you crazy, and the quality of tenant you get. A few months ago I rented a basement apartment for a reader of this blog. I rented it to a very nice seeming young lady, she’s a complete liar, she told me she was single, she’s not, her boyfriend looks like a hoodlum. Awesome stuff! Then there’s another one I rented just up the street here, nice young couple except they are dirty. More awesome. Basements suck.

New Landlords

The only people who are not aware of these issues are new landlords. They look at the numbers on a duplex and think they’ve hit the jackpot. They are buying into one of the more challenging kind of property to manage. They’ll often get into trouble, your tenant screening needs to be 110% for these apartments and even I get tricked. If it seems too good to believe it probably is.

Basement Apartments Are Not A Goldmine

For many landlords what seems like a great benefit just isn’t by the time you calculate all the time required. More seasoned investors often opt to rent out the house as a whole. All the utilities go into the one tenant’s name and the landlord no longer has to “manage” them or the conflicting tenants. I’m not sure why tenants who rent in a house often argue. In a building you almost never see these kinds of squabbles over smoking, parking, garbage, lawn maintenance and so on.

Great Areas Are Different

If you happen to be in a great area, you will get a decent tenant profile in a basement apartment and so go ahead and rent it out. If you are close to the subway, you’ll also get decent tenants. Once you get away from these areas, you’ll start seeing the problems appear. If it seems like you’ve had a string of bad tenants or aren’t impressed with the people you’ve had, maybe it’s time to look at renting out the duplex as a single family dwelling and gaining some peace and quiet.

What have you found? Have you had problems with basement tenants? Is it worth the extra money to rent it out?

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41 Comments so far ↓

  • Mike Holman

    I lived in a basement apt for 3 years before I bought my first house. I can honestly say that basement apts were cheaper.

  • brandi

    Many years ago, I was that new landlord – never again! We rented our 2 bedroom basement to a “friend” a single mom. We gave her a great deal to help her out and no lie, within a month, she had moved in her new boyfriend, her brother, brother’s girlfriend, their baby and her 2 nieces. Yes, thats right, 6 more people and there was nothing we could do. It took a few more months until they moved to a bigger place. We learned quickly we were not landlords.

    • Rachelle

      It’s unfortunate because you might have been an awesome landlord but now you’ll never know. :) For instance I get very good tenants in condos usually and whole houses…

  • Financial Uproar

    Being the proud owner of a house with a basement suite, there are points I agree with and points where I disagree.

    Any basement suite I’ve ever seen is considerably less than it’s apartment equivalent. Mine rents for 25% less than a comparable apartment. Maybe in a hot rental market landlords can get more, but I’ve never been able to.

    I’ve had great tenants and not so great tenants. If I compare them to the level of tenants I’ve had in my other rental houses I’d say they were pretty much the same. Some people have no problem living in a basement. And some of them are liars. You have to take the good with the bad. It’s part of the business.

    I specifically have my basement set up so I pay all the utilities. There’s no way for my tenant to turn up the heat. Too cold? Here’s a blanket :)

    Saying all of that, you do make some great points about basement apartments and it’s important for people to know the negatives. I think people are out of their mind to buy a unit and then rent out both halves. And if your basement apartment doesn’t meet zoning requirements you’re always at risk to get shut down.

    There are hundreds of thousands of these units across Canada. Because of them, many people get affordable housing, affordable housing that wouldn’t be available if it wasn’t for basement suites. I think the pros outweigh the cons. But then again, I’m pretty biased :)

    • Rachelle

      Basement apartments aren’t all bad, but they’re not a goldmine either. I rented my own basement for years. I have notice since I’ve been doing this that tenant quality is eroding in general as barriers to owning your own property decreased.

      For example I used to rent the 2 bedroom downstairs for $900 then I found that the building down the street had reduced their prices to $800 for a two bedroom. The last time I rented it was for $775 per month, but my utilities cost went up about $200 per month. So my net was about $500 per month. Plus in this old house of mine the soundproofing is not good at all so every time they had an argument I would be subjected to it. I did have some very good tenants in there for extended periods of time.

      When the baby got older I had to move my office down there, he was getting into everything but it didn’t make me too sad.

      On the other hand this is not a good rental area, it’s far from transit and amenities and also not what one would consider a desirable area where the price delta would justify a person choosing to get cheaper rent but still live at a really nice address.

      It’s so funny I wrote this today because tonight I attended one of those situations. The basement tenant was moving out, he spit on the other tenant’s boyfriend’s car. Then the other guy parked across the driveway so no one could get out and was threatening the leaving tenant. They were fighting about garbage, noise, drug smoking on the front porch etc. Just the type of situation everyone loves to deal with. Meanwhile I cut my finger on the rose bush over the hydro meter so I’m bleeding on everything… I manage other properties too and never seem to encounter these kinds of problems.

    • Bernadette

      That is just wrong…I am a tenant in a basement apt and we are human beings just like you are….”tenant” is not my name….I have arthritis, living even with a sweater on does not help the cold from the landlord controlling my heat makes it worse…..Listening to you proves one thing you are one of those landlords that as long as he or she gets the money from teh apt and does not have to put any in..its all good….You are the landlord, its your job to make it insulated enough and provide enough heat for the tenant to be warm……There are words for landlords like you and none I can say on here….Shame on you!

      • Rachelle

        Dear Bernadette,

        Heat complaints are common in basement apartments mostly because when the home was built, it was not designed for an apartment. Most basements have vents in the ceiling and heat rises. No matter how good my landlording skills are I cannot affect physics. Basement apartments are also below ground, concrete is porous, and this leads to higher humidity which make any cold more uncomfortable.

        If I had arthritis, I would not live in a basement. It is not a good environment. No landlord or property manager is going to rebuild the house to deal with these building issues.

        As I told you my office is in my basement and I have a little space heater down there. I could turn the heat up to 80 degrees upstairs and it would still be cold feeling downstairs. So I get what you’re saying.

      • John

        I have a cold basement apartment. My landlord provided me with an electric heater that looks like a radiator. I keep this at medium because of the heat it puts out. It works quite well.

  • jesse

    Coming from the Vancouver area, in the city proper a significant % (probably a majority now) of houses have basement suites, often two of them and occasionally three if one includes a laneway house.

    My experience with renting has generally been positive, relative to the horror stories, but the old “I’m the only occupant” is used and abused so much I never believe it any more. I’ve seen cases of people casing suites for their parents or out-of-town relative who will be immigrating. Sure… I’ll take your unseen relative no questions asked… click. After a certain point all you can go on is looking the applicant in the eyes and even then who knows.

    The other think I found is the tenure is generally short, about a year or so on average. Filling the suite has never been a problem for the right price (discounts were offered to perceived good tenants) but given the number of applicants we rejected I have to wonder where the rejects eventually ended up!

  • Rachelle

    Vancouver is a very different market than the Greater Toronto Area it may be different there.

    I’ve wondered that too! Where do our rejects end up?

  • Rob in Madrid

    Wow the memories, we bought our House at that Hightower of the last housing bubble (early 90s)and as as we over extended ourselves we too put in a basement apartment and I guess we were lucky the first tenant paid the pricey sum of 450$ a month and gave us 2 months deposit, yeah cash flow, lived there for two years before moving on, then a friend moved in lived there for another two years Before again moving on. We then found another tennat but before signing the paper work we got a call warning us he was a professional tenant and we canceled the lease. By that point we were in better shape and took back the basement. So for us basement apartment worked out very well.

    • Rachelle

      My basement apartment help pay off this house, so I’m grateful but surprise surprise no one gave me free money at different points I had to give up the backyard, one tenant in particular liked to invite her family over for beer drinking parties, One of which involved people playing golf in my vegetable garden :)

  • Ernie

    wow … you sure are judgemental of us ‘bottom dwellers’. I’m renting a basement for the advantages it affords … yes there are some good reasons for preferring to live downstairs.

    I’m probably the best renter most landlords will ever have … even if I say so myself.

    I’ll give you another 30 years … chances are your rhetoric will have toned down a wee tad.

    ~retired in the basement

    • Rachelle

      Ernie,

      My apologies for insulting you I did not mean to do so. What I want to do is clone you and Mike and rent you all the basement apartments. That is the problem I can’t find enough tenants exactly like you :) if I could I wouldn’t be complaining.

  • Garfield

    I have been renting my basement ROOM out now
    for about five yrs.. and I have had good tennants
    and bad tennants, what I have found is that the
    younger they are , the more problems I have with
    them. The ones on ODSP are the worst, You never
    have a problem getting your rent, its sent to you direct from ODSP, its the other stuff you try to collect on, thats a problem. Over all, if I didn’t need
    the money, I would not rent out the basement room.
    I have an apt. building and I live in it too. I had to
    install special windows that met the fire code as well.
    In one of my other apts. if you want to talk about
    garbage, one tennant filled the snd bedroom from
    floor to ceiling with garbage . they were a family of
    four, him and her with two teen age kids. they were
    the worst tennants I ever had.
    Garfield

    • Rachelle

      Yep, basement tenants are not for the faint of heart. I too rented out my basement apartment and I did have great tenants for long time but, the bad ones were very bad…

    • Rachel

      So nice of you to be judgmental of people on social assistance. :(

      • Rachelle

        I’ve rented to many people on social assistance. It’s not my fault the government doesn’t give you enough to pay your rent and eat. If I was faced with that choice, I’d eat too. Unfortunately… I work for landlords who also have to eat. My job is to protect their interests and their money. Ask anyone who works in the business. We’re not being judgmental. You can’t get credit cards or mortgages either. Why should I give you an unsecured line of credit for an apartment?

        • me

          “Why should I give you an unsecured line of credit for an apartment?”, because the tenant is paying the mortgage or making money for a landlord if the unit is paid off. If everyone could get a mortgage then who would be left to rent? Little offended by this as up until January 2009, I had good credit, and my wife and I where saving for a down payment to buy a home. That was until a drunk driver took her life. Creditors don’t care about the reasons why a single person can’t handle duel-income debt which is why I HAVE to rent now for the next 5 years until my credit is fixed. Landlords are judgmental as are any other business out there.

          • Rachelle

            The fact is that if your credit is so bad you can no longer get a cell phone, then it’s hard to justify renting you an apartment. It is fairly sad that people like you who have a single traumatic event that cascades into unfortunate consequences for your credit get lumped into the same category as people who never willingly pay a bill in their life or never seem to manage their finances. You will find some people that can read a credit report and interpret it.

            It’s usually clear when a single event is at fault because every single credit source defaults at the exact same time oftentimes after years of great records. Then afterwards when the situation stabilizes…things get better. Death, divorce, illness, unemployment are credit destroyers.

  • Deb

    I rent the upper floor of a house in Calgary that includes the garage. I have been here for three years and have a great relationship with my landlords. When I moved in a guy lived in the basement and had been there for five years. We had a good relationship also. But he had a girlfriend and ended up moving in to her house.

    Cue the new tenant who has been here for three months. Both myself and the landlord can’t stand her. She lied to get the suite and is one of those people who manipulates people to get what she wants. I have never disliked someone so much and as an example, I spent 5 minutes talking to her last week to try Nd be niceand within that time she asked to see my suite, asked if she could have my $$$ recycling, and asked for free paint to paint her bathroom. (I own. Painting company). She totally put me off. Then the next morning she asked if I wanted to go for breakfast and if she could pay me on Friday, then the next day text and said she was sick and could I go get her gingerale. There is garbage and old furniture stacked at the bottom of the stairs that partially blocks access to the laundry room, an old leather chair she left on the deck. She won’t park correctly in front of our house which causes the neighbor to complain to me and she is just not very clean.

    I have talked to my landlord about it and she told me that the woman is constantly asking for things. (like new fridge, ext) and always demands a reduction in rent if it’s not done asap. My landlord keeps saying she will give her notice if she demands one more thing, but then it follows with, but she always pays her rent on time…nor sure what I should do as I am uncomfortable living here now.

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  • Lizza

    I have a wonderful spacious basement apartment and its the best apartment in the building. Enjoying life and being a positive person is vital for happiness and I you can have that too. Job burnout happens all the time and it sounds like that is what has happened…

    • Rachelle

      Lizza, I’m glad you like where you live, I can assure you that most people do not feel this way about living in basement apartments. If you disagree with me feel free to conduct your own survey of your peers.

      You can also conduct your own survey of property management companies… most won’t take basement apartments or houses that have them. Call leasing agents ask them to rent them out. Go to the Landlord & Tenant and ask around what floor the tenants live on… I’ll admit I’m no Sally Sunshine but saying what I’ve observed after 15 years in this business doesn’t make me burned out.

  • Robert

    Hi Rachelle

    Just found your website and i was horrified to read your article on basement apartments. That’s because my experience of having a basement apartment in Toronto has been marvelous! I have three basement apartments on the go. Over the last 12 years having them there has provided me with $194,000 in revenue. That’s a lot of easy money for almost no work on my part, except the initial renovations.

    I fixed them up to modern standards, charge a premium, and in most cases have had wonderful tenants. The ones I had problems with they were relatively minor. Mind you, I go the extra mile and screen the hell out of them before saying yes. That’s really important as you know – screening!

    I soundproofed the ceilings the best i could and look after my tenants. They look after me by paying the rent and looking after the place and watching over the house when I’m gone.

    I bought a house in a different city and put a basement apartment in that one as well and so far it has also been a good experience coming up to a year.

    So i think your article is overly harsh on basement apartments and the kinds of people who live in them. Or have I just been “lucky” for the last 12 years and an exception to the rule? I don’t know!

    Still, I think people are well advised to heed your warnings though, especially the part about what area they are in. I advise they call around to other landlords who are renting basement apartments and find out what the tenant market is like before deciding to renovate and rent their basements.

    Good discussion!

    Bob

    • Rachelle

      I swear it depends so much on the area. If you are in an area like mine where you can get a one bedroom apartment in a building for the same price as a basement…it really is hard to get decent people. Having said that I also get your point about the revenue. The basement in this house paid the mortgage and I paid utilities and taxes. I have had really great tenants here and in other basement apartments.

      But…whenever you do have problems in a duplex 9 times out of ten it comes from the basement.

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  • Mike

    I am looking to buy my first house, mostly what I saw, prices are much higher for the houses that have finished basement with a sep – entrance.

    I know, if my mortgage is more then 1700 then I cant afford them with out renting a basement. What would you suggest me to buy a house much cheaper (to afford mortgage easily) or go for a bigger house and rent the basement.

    I just want to know the risk factor in renting ?
    Thanks

    • Rachelle

      Buy the cheaper house. Most people do not end up enjoying basement tenants. Some are excellent, but I’ve been there with some not so good ones. I really enjoyed the ones who took over my backyard with their two dogs, classy beer store lawn chairs and played golf in my tomato plants.

  • Katherine

    I live in a basement apartment right now…its 20 minutes from the city…in the country. I LOVE IT the people that own the house are fantasic. They leave me alone…i see them once a month when i Pay my rent. They have never entered my apartment without my consent, and they are just perfect :) I know not everyone would have such a great experience…but i love it.

    Plus its a walkout…so mostly above ground, with my own driveway! I’m not moving until its time to buy my own house :)

    For all you landlords with a basement apartment..u can have a good experience too, if u make sure the person is good! Not just a reference check either…meet with them a few times!

  • Kristine

    Thanks for looking down on basement tenants :( I’m a recent uni grad, on my first job and I live in a basement suite. In school, during an internship in a different city, I also lived in a basement suite. The landlord there was actually my roommate’s supervisor, and we all worked at the same place. A couple months in he moves in a random middle aged male into our suite, when we were 2 girls in our early 20′s and did not agree to this at all. Then he kicks us out at the end of 4 months when he knew that our internships were to last another 4. We always paid our rent on time, were clean and are quiet types.

    Horrible tenants exist, but so do horrible landlords. My current landlady has been very nice and reasonable so far, I hope she continues to be. I wish landlords could be more considerate of us tenants.

    • Rachelle

      I’m sorry, here’s nothing wrong with basement tenants per se… and I totally agree with your point of horrible landlords as well. I’ve met my fair share.

  • Juliet

    This is probably the worst article i ever read. Basement apartments are cheaper. It helps the Landlord and the Tenant both save money.

    How often do you hear a stampeed of people running upstairs? depends… do they have children?

    apart from that, i am disgusted from your comment about “low profile tenants”

    I certainly hope you never end up on the welfare system, cause if you do; its a shelter for you.

    many people who end up living in basement apartments are not “scum” as you have labeled them. Some are business owners who have claimed bankruptcy.

    Single mothers who are not in receipt of child support and can not afford a “real” apartment.

    Couples who are first starting out want to pay as little and save as much.

    Depending on where you live an “apartment” is not an option. In York Region for example, there are very few apartment buildings.

    Such a poor article… same on you for labeling people without knowledge of these “low profile clients”

    and, everyone lies. just like you. Over exaggerating this story.

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  • Rachelle

    Good luck with your venture.

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