loading...

First-Timer Primer: Renting Out Your Basement

by Lark Turner

First-Timer Primer: Renting Out Your Basement: Figure 1
An English basement for rent near H Street.

This article was originally published on UrbanTurf in 2014, but we are re-publishing now, with the summer housing crush upon us, for would-be landlords hoping to rent out their English basements.

Many home buyers on the hunt for a rowhouse in DC these days are looking for some type of lower level unit that will help offset their monthly mortgage payments.

But if you buy a home with an income property downstairs (or at least the potential for one), there are many things to take into consideration. UrbanTurf recently spoke with a reader, Anita, who bought a rowhouse with a rentable unit downstairs. She shared the details on what to consider if you’re thinking about taking the landlord leap.

Her biggest piece of advice? Do your homework.

Specifically, know what buying a home with an income property could do for your mortgage — but don’t assume you’ll always want or be able to have a tenant occupying the space.

“Be conservative,” she said. “You could have a situation where your unit sits vacant, so you really need to be able to afford the house [without always having the unit rented]. But if you can do that and then you end up renting out the place, you stand to save a whole bunch on your mortgage.”

DC sellers know how much a nice basement rental can shave off a monthly payment, so homes are priced to reflect that. A house in Mount Pleasant with a two-bedroom rental downstairs recently incited a wild bidding war and sold for about $200,000 above asking. The rental fetched $2,400 a month.

Once you’ve found the basement-outfitted home you are looking for, it’s time to pull out the measuring tape. In DC, basement ceilings must be a minimum of 7 feet high in habitable spaces, and a little less than that in kitchens and bathrooms. Two means of egress as well as separately metered heating and cooling systems are required in order to qualify for a Certificate of Occupancy.

Fixing any issues with the rental can be costly. In Anita’s case, the previous owner had already taken on the onerous and expensive task of digging out the basement, underpinning the foundation and pouring a new concrete slab downstairs.

Whether or not the basement is up to code, currently rented and properly licensed will have an impact on the price, so if that work has been done, make sure to request documentation from a seller before closing on the home. UrbanTurf has written on this topic before, but it bears repeating: An unlicensed unit can be a nightmare in our tenant-friendly city. Without the right paperwork, Anita tells us, landlords have very little recourse in the District’s legal system. The tenant documentation took Anita about six hours to complete, she said. If you’re not willing or don’t have time to do the paperwork, consider whether you’ll have time to be a landlord 24 hours a day — especially when your tenant is just downstairs.

If the basement space needs renovating, be choosy. Anita mentioned the importance of picking durable and, to the extent possible, inexpensive finishings that are easy to clean and maintain. Tile floors — wood-effect tile is looking more realistic these days, she said — are a great choice. And for the walls, “exposed brick markets really well,” she said. “You don’t have to paint it every time you get a new tenant.”

Have an inspector look closely for downstairs water damage, and if your house is a twin of one of its neighbors, talk to them about how their basement is holding up. Frequent flooding can be an issue in some DC neighborhoods. If you’re inheriting a tenant, be sure to be ready with a handyman who can deal with any such issues, not to mention the repairs that come up with plumbing, fixtures and other issues.

Finally, once you’re ready to market the downstairs unit, research what kind of rent it can fetch, and be conservative in your estimates. Remember to factor in some time and money to prepare and market the unit between tenants. Look at comparable properties on Craigslist and keep in mind that even the most brightly-painted English basement will generally rent for less than an above-grade apartment in the same neighborhood.

Other First-Timer Primers:

This article originally published at https://dc.urbanturf.com/articles/blog/thinking_of_renting_a_basement_heres_what_to_consider/8217

7 Comments

  1. soulshadow55 said at 8:16 pm on Monday March 10, 2014:
    Hi UT, I have a legal basement space in my home in Columbia Heights. I'm terrified about going thru the whole build-out/rental process. In the past I've gotten estimates as hight as $160,000 to build a 1-bedroom apartment in the space. Even though it's already empty to the studs so there's no need to knock down existing walls or remove anything. Also, my water heater and furnace are in the space so I'd have to disturb the tenant every few months to change the filter and have the furnace checked. However, I'd like to do a small renovation (kitchenette and maybe a half bath) and offer the space to a non-profit as office space. Can you do an article on renting to a non-profit/small business as opposed to a tenant rental?
  1. Emilie Fairbanks said at 9:13 pm on Monday March 10, 2014:
    There are a long list of requirements for a basement rental in DC. You should also make sure before you buy the property that the area is zoned for rentals. Make sure you have a DC specific lease in place, as there are several quirks of DC law that don't exist anywhere else. But most importantly remember that you cannot evict a tenant without a reason in DC and the end of the lease isn't a reason, so you could have the tenant for a long time. Becoming a DC landlord has higher risks than in most other places because the laws are so tenant friendly. If you need the rent to pay your mortgage, you aren't in a position to become a landlord here. Buy a cheaper house.
  1. JTK said at 3:43 pm on Tuesday March 11, 2014:
    I can't stress this enough: Add a clause in your lease requiring renters insurance from your tenants.
  1. PD said at 4:19 am on Wednesday March 12, 2014:
    Not true that you need separately metered electric and cooling. You just need separate controls.
  1. HouseguyDC said at 2:14 pm on Monday June 29, 2015:
    Or, you could talk to someone in DC instead of India
  1. Keith said at 7:21 pm on Tuesday June 14, 2016:
    Does a homeowner need a Certificate of Occupancy or other legal paperwork from DC before renting out an English basement in his home?
  1. Nena UrbanTurf said at 8:22 pm on Tuesday June 14, 2016:
    @Keith a legal rental unit requires a Residential Rental Business License from the Department of Consumer and Regulatory Affairs

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!