Converting your basement into an apartment
By Amy Brown-Bowers • Bankrate.com

When the Najam family bought their new home three years ago in Brampton, Ont., they weren't planning to create a basement apartment. But the high utility bills and property taxes soon changed their minds.

"At first we didn't want to do it," says Noreen Najam. But after realizing they would be paying $400 a month for hydro and another $400 a month for gas, plus $6,000 a year in property taxes, she changed her mind. "We did it to get a little bit of income to help us out," she says.

Najam's real estate agent, Robert Barkin, a sales representative with Royal LePage Partners Realty, is seeing huge numbers of buyers looking for homes with apartments, or basements that could be converted into apartments, in order to help pay for their homes. "With the price of housing the way it is, it makes homes more affordable," he says. In cities such as Brampton, basements are often the first things a potential buyer will look at.

Not only are these units beneficial to homebuyers, they're often a plus for growing cities. Luis Rodriguez, senior researcher with the Canada Mortgage and Housing Corporation (CMHC), says secondary suites increase density and affordable housing options. They also make better use of existing city infrastructure. "Secondary suites are beneficial to many people," he says. "I believe that they will become a more common thing over time."

Zoning and bylaw issues
There are three pieces of legislation you'll need to consider before going ahead with your plans to create a secondary suite: municipal zoning bylaws, provincial building codes and fire codes, says Alek Antoniuk, manager of code interpretation, registration and training with the Ontario government. Zoning bylaws vary from city to city and sometimes even from block to block. They spell out the number of units allowed on a piece of property, whereas building and fire codes focus on safety measures.

"Bring in the fire department to find out whether you have sufficient exits for people to get out," advises Marvin Barkin, a Toronto lawyer and long-time landlord. If you don't and there's a fire or an accident, there may be liability issues, says Antoniuk.

In addition to provincial and municipal standards, the National Building Code of Canada also has a set of requirements that apply to basements converted into apartments. For example, the unit must be separated by smoke-tight construction; the heating, ventilation system and plumbing must be separate and enclosed; and the unit must have its own entry that is separate from the rest of the house.

Construction costs
Before enjoying rental income from your apartment, you will likely have to do some renovations. Be sure to factor in all construction costs before starting out because it can be expensive. For example, Najam and her husband paid about $25,000 to have their basement finished by a builder and an additional $10,000 two years later to get it ready for renters.