Investing in an income suite: Q&A with HGTV’s Lisa Colalillo

Categories: Real Estate - Tags: advice, basement, Critical Listing, HGTV, income suite, investment, landlords, Q&A

If you’ve been following our blog you already know that we’re huge HGTV fans.  Remember our PARA Blog Crew submission video??  Yea….it’s a problem.  On any given day you can pretty much guarantee there’s an episode of one of HGTV Canada’s many awesome shows providing the soundtrack to our household.

One show in particular that we’ve been enjoying in this season’s lineup is Critical Listing.  If you’re not familiar with the show, you really should get familiar!

In every episode, property expert Lisa Colalillo along with interior and exterior pros Jo Alcorn and Carson Arthur come to the rescue of homeowners who’re moving forward with their dream homes but have yet to sell their old ones. Faced with the prospect of 2 mortgages, they’re looking get their old houses on the market – but first they need to maximize their home’s appeal to potential buyers…and FAST!  The transformations that the Critical Listing team are able to pull off, often with limited budgets, have been nothing short of astonishing! In one episode they were even able to turn a $15K homeowner investment into a $125K increase in property value!

The show starts with Lisa doing a walk through & providing her analysis of the current shape of the home as well as information on the neighbourhood and demographics of the prospective buyers – what they are likely to be looking for & and what will be important to them.  She really narrows in on what areas of the houses need to be addressed in order for the homeowners to get the most out of their reno budgets.

From there Carson brings his expertise to the upping the curb appeal on the exterior of the homes with some truly beautiful results…

Inside the homes, Jo completely transforms things to create the kinds of spaces that any home buyer could envision themselves moving right into.

Truly inspiring stuff!

Now although we won’t be looking to sell the Dreamhouse any time soon, added value & first impression appeal are definitely important to us since we’re planning to include an income suite in our basement.  And now that Mother Nature seems to have allowed spring to finally make it’s appearance (knock wood), the thawing ground means we’ll soon be able to pour the concrete slab & make some progress down there.

There are a lot of factors that go into planning for an income suite, so when we recently had a chance to participate in a little Q&A with Lisa Colalillo, real estate expert & host of HGTV’s new hit show, we didn’t hesitate to pick her brain to gain some valuable insight on the world of real estate investing.

Q. When creating a rental suite in a home, what are your top 3 tips on how to spend money to both increase value while attracting good tenants? Where will we get the most bang for our buck?

A. 1: Treat it like a business – build it to code and get the municipal approvals and licensing. The backlash of being shut down because your unit is illegal is a pain in the ass-ets. A savvy tenant that knows you have an illegal unit can take you for ride and cost you big bucks.

2: Bright and spacious wins – rental suits in a home are typically located in the basement. The less it feels like a basement the more desirable it will be, which creates more demand…that means large windows are a great bonus and lots of bright lights.

3: Keep it warm – Laminate or Engineered hardwood flooring is often your best bet to keeping the basement cozy. Plus its easier to keep clean than carpet and its warmer on the feet than ceramic.

Bonus tip – Sound proofing. It’s not a reno that gets a high impact reveal, but it creates privacy for both you and your tenant. If your tenant can hear you, it’ll get annoying fast and you may find yourself with a unit that gets a high frequency of turnover. One last thing, don’t be afraid to stage your rental. I’m seeing this trend more and more. It sets the scene for the potential tenant making it easier for them to fall in love versus a vacant unit. The Toronto area has super low vacancy rates. This means that the better the condition and appeal of your rental unit, the better the quality of tenant to choose from.

Q. What is the best piece of advice you would give someone considering getting their start in real-estate investing?

A. If you are new to investing in real estate, I would recommend focusing on your cash flow first. By using this strategy you start to accumulate income right away as well as build equity. Once money flows in monthly, it starts to compound and that makes it easier to handle more technical strategies like flips.
Also, don’t let the anxiety of filling the rental unit outweigh the security of having a great tenant. Be picky (in this market you really can be) because a great tenant will be a great experience and investment.

Q. This being our first venture into being landlords, I’m a bit nervous & want to ensure we’re getting the best tenant possible. In your experience, how can you tell if a tenant is going to be a problem & how do you avoid potential issues?

A. Even after all the due diligence (references, financial history, etc.) I always recommend that my clients (the landlord) and myself have a meeting with the potential tenant before signing any agreements. Meeting face to face reveals a lot of information. Is the tenant on time? Have they come prepared with all documentation and filled it out? Did they come clean and dressed for an interview? Did they have issues with previous landlords? A meeting is a great way to observe their character and to follow your instinct. I did a video on my blog www.lisacolalillo.com about this exact topic:

Q. Do you recommend that homeowners work with a real-estate agent when renting out their properties? What are the advantages? Costs involved?

A. Real estate agents can be a great resource for long term tenancies. They can maximize your marketing exposure, help you to make sense of credit reports,when investigating potential tenants as well as put together a lease agreement.  But PLEASE, as much as I love your cousin/friend/massage therapist that does real estate, work with someone that is experienced in the area of investment real estate, otherwise its the blind leading the blind. You can expect to pay the first month’s rent for the service. 

Q. What are some worthwhile resources for prospective landlords?

A. If you want to get into the landlord game, then you must learn the rules of the game.

These are your best resources:

• The Province’s Landlord and Tenant Board website:  Familiarize yourself with the site.  Here you will find all forms and procedures for situations which could arise.
• The site also has a guide to the Residential Tenancies Act. It’s a great way to learn about the rights and responsibilities that come with being a Landlord.
• People who are actually doing it, and have been successful. These are people who are doing it well. Tapping into other people’s experience is a great way to shorten the learning curve and get ideas about systems to put into place. For example, when I first got into rental properties someone had mentioned to me to add padlocks to the front doors, and not to handout keys. It was an easy way to remove the problem when tenants lock themselves out of the house at late hours. Plus there’s no need to change the locks for each new tenant, all you have to do is change the code. 

We really have to thank Lisa for taking the time to answer our questions & provide such helpful tips.  We’ll definitely be keeping these things in mind as we proceed with our basement reno!

Be sure to tune in to the season 1 finale of Critical Listing tonight (April 14, 2014) on HGTV Canada beginning at 9pm ET|PT.  Follow us on twitter @dreamhouseproj where we’ll be live tweeting along with the show!