Ask An Agent: What Steps Do I Need to Take to Make My Rental Legal?

by Mark Wellborn

Takoma Park Porch by Chris Spehr

In this week’s installment of Ask An Agent, a couple buying a home with a basement rental unit inquires about what steps need to be taken in order to make sure that the unit is rented out in accordance with the law. Long & Foster’s Meg Finn offers up some insight.

Question: My wife and I are in the process of buying a home in the city of Takoma Park, Maryland, with FHA financing.  We’re hoping to supplement our income by renting out the one-bedroom basement.  We are familiar with the building code requirements such as the need for a separate egress and the bedroom must have a window and closet.  But is it legal to do this with a home that was purchased with FHA financing, and how do you go about making sure that it is done within the legal and income tax frameworks of federal, state and city authorities?  We are both committed to doing this legitimately, not on the sly. 

Answer: Montgomery County and the City of Takoma Park are very supportive of owners renting out basements as well as other parts of the house; it is a very beneficial arrangement for all involved, providing affordable housing in a pleasant environment for the tenant, and giving the owner some extra cash and often congenial company. In a single-family owner occupied house, the term for this housing is “accessory apartment.”

As far as renting out the basement, it doesn’t matter what kind of loan you have, FHA or conventional. However, what you must do (in order for the rental to be considered legal) is apply for an Accessory Apartment Rental Facility License from the Montgomery County Department of Housing and Community Affairs and a special exception for the accessory apartment from the Montgomery County Board of Appeals. These steps involve a fair amount of paperwork but the county wants to help you make this happen (they’re well aware of the shortage of affordable housing in the area).

If you go to the Montgomery County website they have a very handy “Accessory Apartment Fact Sheet”. One thing that the fact sheet states is that you have to have owned the property for one year before renting, and the county will come and inspect the unit (factors they look for include egress, ceiling height and ample parking). After you are licensed, the county will inspect once a year; if you’re in good shape it becomes every two years.

You also need to notify the Takoma Park Housing Department about your apartment, and you will need to take a landlord course that the city periodically offers. Takoma Park also has a well known rent stabilization law (“rent control”) which is only partially applicable to accessory apartments—you can only raise the rent once a year and you must give two months notice. I live in Takoma Park and one thing I can almost guarantee is that you won’t have any trouble finding a tenant!

Lastly, you do need to declare the rental income on your taxes, but you also get to write off some of your expenses.

If you would like to submit a question for Ask An Agent, send an email to .(JavaScript must be enabled to view this email address).

See other articles related to: real estate investing, ask an agent

This article originally published at http://dc.urbanturf.com/articles/blog/ask_an_agent_what_steps_do_i_need_to_take_to_make_my_rental_legal/1498


  1. Stacey said at 5:56 pm on Tuesday November 10, 2009:

    Great topic, would love to hear it answered from the D.C. perspective.
    In particular, with D.C. real estate listings I am curious what the legal difference is considered between having a legal basement rental unit and those spaces advertised as an “in law suite”—what are the different permit/legal/tax responsibilities.  Is there something different in D.C. law between renting out an “in law suite” and just an extra room in your house?

  1. Jeanne said at 6:16 pm on Tuesday November 10, 2009:

    I wonder how many rental units in DC and MD area are actually legit. Interesting piece.

  1. Pat said at 2:20 pm on Thursday March 11, 2010:

    My hubby and I are planning to buy a condo en Prince William county VA, same exact question but from VA perspective.

  1. hamptons real estate said at 1:21 pm on Thursday June 3, 2010:

    Good article.  I have been thinking of renting out my guest house, and this is very informative.

Join the discussion

UrbanTurf now requires registration in order to post comments. Register here, or login below if you are already registered.

Click here if you forgot your password.

DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!

Northern Virginia

Profiles of 14 neighborhoods across Northern Virginia

Looking to Give People A Reason to Stay Past 6pm
Happily Straddling the Line Between City and Suburb
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
Crystal City
Turning Lemons into Lemonade
Lyon Village
Developing An Air of Exclusivity?
Hitting Its Growth Spurt
An Urban Village Hitting Its Stride
Del Ray
Virginia’s Small Town Near the Big City
Eisenhower Avenue
The Vibrancy Might Take a Few Years
The Quiet Neighborhood By the Beltway
Old Town
Mayberry By The Potomac
132 Commerical-Free Acres
Downtown Falls Church
Staying the Same in the Midst of Change
Tysons Corner
Radical Change Could Be On The Way

See more Northern Virginia »


Profiles of 14 neighborhoods in suburban Maryland

Small-Town Living in the State Capital
Bedroom Community Gets Buzzing Cache
Cabin John
In With The New While Maintaining the Old
Chevy Chase
Affluence, Green Lawns and Pricey Homes
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
A Suburb on Steroids
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
Takoma Park
More Than a Little Bit Quirky
A Foodie Magnet on the Verge of Change
Capitol Heights
Kudzu, Front Porches and Crime
Glass Half Full or Half Empty?
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
National Harbor
A Development Rises Next to the Potomac
Riverdale Park
A Town Looking For Its Identity

See more Maryland »

Northwest DC

30+ neighborhood profiles for the city's biggest quadrant

16th Street Heights
DC's Sleeper Neighborhood
Where (Almost) Everyone Knows Your Name
AU Park
One of DC’s Last Frontiers Before the Suburbs
DC’s Northern Neighborhood on the Cusp
DC’s 535 House Neighborhood
Cathedral Heights
Do You Know Where That Is?
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
Cleveland Park
Coming Back After A Rough Year
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
An Island of Serenity East of the Park
Dupont Circle
The Best of DC (For a Price)
Foggy Bottom & West End
Where the Institutional Meets the International
Forest Hills
Ambassadors and Adventurous Architecture
Fort Totten
Five Years Could Make a Big Difference
Foxhall Village
350 Homes Just West of Georgetown
Friendship Heights
A Shopping Mecca With a Few Places to Live
History, Hoyas and H&M
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
A Posh View From Embassy Row
LeDroit Park
A Quiet Enclave in the Middle of the City
Logan Circle
Trendy Now, But Not By Accident
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
Mount Vernon Triangle
From Seedy to Sought-After
The Long, Skinny Neighborhood at the City’s Northwest Edge
Park View
It’s Not Petworth
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
Getting a Vibrancy of Its Own
The Duke’s Former Stomping Ground
Shepherd Park
DC’s Garden of Diversity
Spring Valley
A Suburb With a DC Zip Code
Not To Be Confused With Takoma Park
Not Quite Like Its Neighbors
U Street Corridor
The Difference a Decade Makes
Woodley Park
Deceptively Residential
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents

See more Northwest DC »

Southwest DC

The little quadrant that could

Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come

See more Southwest DC »

Northeast DC

Profiles of 10 neighborhoods in NE

New Development Could Shake Up Pastoral Peace
A Little Bit of Country Just Inside the District’s Borders
Not to Be Confused With Bloomingdale
H Street
A Place To Party, and To Settle Down
The Northeast Neighborhood That Few Know About
Michigan Park
A Newsletter-On-Your-Doorstep Community
Evolving from a Brand to a Neighborhood
Ripe for Investment Right About Now
The Difference 5 Years Makes
Big Houses, A Dusty Commercial Strip and Potential

See more Northeast DC »

Southeast DC

6 neighborhoods from Capitol Hill to East of the River

Capitol Riverfront
Still Growing
Hill East
Capitol Hill’s Lesser Known Neighbor
Congress Heights
Gradually Rising
Notable for Its Neighborliness
Historic Anacostia
Future Promise Breeds Cautious Optimism
Eastern Market
A More European Way of Living

See more Southeast DC »

Upcoming Seminars ▾