Ask An Agent: What Steps Do I Need to Take to Make My Rental Legal?
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 firstname.lastname@example.org.
See other articles related to: ask an agent, real estate investing
This article originally published at https://dc.urbanturf.com/articles/blog/ask_an_agent_what_steps_do_i_need_to_take_to_make_my_rental_legal/1498.
Most Popular... This Week • Last 30 Days • Ever
Clarion Partners, the owner of the Chevy Chase Pavilion, has filed modifications to i... read »
Where it's cheaper to build than buy; Elon Musk is not making Texas happy; and the wo... read »
New renderings show the public space that will be part of the huge new residential de... read »
The Townhomes at Michigan Park and Riggs Park Place are now selling their final homes... read »
Several large projects are in the works across the Potomac in Rosslyn while others ha... read »
At an ANC 4A meeting on Tuesday night, representatives from Whole Foods said that the... read »
The application to raze the infamous fast food location at New York and Florida Avenu... read »
While homeowners must typically appeal by April 1st, new owners can also appeal.... read »
The application has been filed for the American City Diner along Connecticut Avenue i... read »
The 650,000 square-foot project, designed by Adjaye Associates and Hickok Cole, will ... read »
With this weekend's DC houseboat tour a day away, UrbanTurf thought it only fitting t... read »
President Obama travels to Denver this morning to sign the stimulus bill that has bee... read »
In this week's installment of Ask An Agent, a reader wonders if there is a rule for h... read »
As The Wharf prepares to begin construction, DC's houseboat community heads to its ne... read »
In this week's installment of Ask An Agent, a reader asks a fairly common question th... read »
- Whole Foods at Walter Reed To Open This Summer
- The End is Here: Raze Permit Filed For Wendy's at Dave Thomas Circle
- How to Appeal Your DC Property Tax Assessment
- Raze Application May Spell The End For One of DC's Last Diner Buildings
- A First Look at the Five-Building Centerpiece of the St. Elizabeth's Redevelopment
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!
Intro guides for first-time home buyers
Awesome and unusual real estate from across the DC Metro