Aside from the trade conflict, the housing issue took centre stage in the 2025 federal election campaigns - and rightfully so. Even in affordable cities like Welland, the widening gap between income and living expenses has pushed homeownership out of reach. Despite this, many persistent homebuyers are making their homeownership dreams come true through unique options. One such option gaining popularity among homebuyers is renting a portion of the property.

If you have already bought a house for sale in Welland or are about to, this is an option worth considering. You could turn the basement of your new detached, semi-detached, or townhouse property into a rental space to earn extra income. But can you legally rent out all basements, and what other factors should you consider? Let’s explore below!

Can All Basement Suites in Welland Be Used as Rental Units?

In case you didn’t know, an accessory dwelling unit (ADU), in-law suite, basement apartment, or secondary suite is a self-contained living space within or next to a single-family home. These spaces in houses for sale in Welland have their own entrance, kitchen, bathroom, and sleeping area. However, you cannot legally rent any basement of a Welland house.

To legally rent out a basement as a secondary suite, the space has to follow some safety, building, and zoning standards, such as:

• The unit must have its private entrance, either from the outside or through a shared area like a hallway.
• The ceiling of the basement unit in Welland must be at least 6 feet 5 inches (1.95 metres) high.
• The entire rental basement space must comply with fire safety regulations.
• The in-law suite in Welland must have sufficient windows, and one window must be large enough to work as an emergency exit (egress).
• You must apply for the right permits, and the city must inspect and approve the unit before you can legally rent it out.

You can buy a house with a regular basement and turn it into a legal secondary suite yourself. Several government programs are available to help cover some of the costs of converting and creating a legal secondary suite. Or, you can buy a house with an existing legal, income-generating basement apartment and save the trouble.

Key Things to Consider When Making Your Basement a Legal Apartment in Welland

1. UNDERSTAND UPFRONT COSTS BEFORE YOU START

If the basement of the house for sale in Welland doesn't already have a legal suite, you must build one and legalise it. Here is a breakdown of what this legalising and renovating process may cost:

● Design and Planning Costs: $2,000 to $5,000

You must hire a qualified architect or designer to draft design plans that comply with the Ontario Building Code and local bylaws.

● Permit Fees: $282 (Flat Fee)

The City of Welland charges a flat fee of $282 to convert an existing basement into a legal secondary unit.

● Renovation Costs: Starts at $85,000

In Ontario, renovating a 900-square-foot unfinished basement into a fully legal apartment, including a kitchen, bathroom, separate entrance, and all-code-compliant upgrades, can start at around $85,000.

● Egress Window Costs: $2,500 to $5,000

Installing an egress window in the secondary suite in Welland can cost anywhere from $2,500 to $5,000.

● Contingency Fund: 10-15%

You must always set aside a contingency fund of 10% to 15% when renovating your home’s basement.

2. CALCULATE YOUR RENTAL INCOME

Follow these steps to figure out how much income you can earn from your rental basement unit in Welland -

● Estimate Annual Rental Income

Start by researching what similar basement apartments in Welland are renting for. Let’s suppose you find that the average rent of similar basements in the area is $2,500 a month. In that case, your annual rental income would be $30,000.

● Factor in the Vacancy Rate

Next, factor in the vacancy rate - the percentage of time your unit might sit empty. As of October 2024, Ontario's average rental vacancy rate was 2.7%. Considering this rate, your adjusted rental income ($2,500 a month) after calculating the vacancy rate would be around $29,190.

● Subtract Monthly Expenses

First, use a mortgage affordability calculator to find the mortgage costs and other homeownership expenses. Then, consider only the part of your homeownership expenses tied to the basement unit. For instance, if your basement makes up 30% of the home’s square footage, 30% of your housing costs should be considered expenses for that unit.

Let’s suppose your mortgage, tax, and insurance costs are $3,500 a month, and other expenses (utilities, maintenance) are $150 a month. Considering your basement share as 30%, the unit's total monthly expenditure will be $1,095.

● Calculate Your Annual Cash Flow and ROI

Finally, to figure out if your investment is really worth it, you must calculate the annual cash flow and return on investment (ROI). Let’s understand the basement ROI calculation with an example -

Suppose -

The renovation and legalisation cost of your rental basement apartment = $90,000

Annual rental income minus vacancy loss (refer to the example given above) = 29,190

Annual homeownership expenses (refer to the example given above) =$13,140

Now, let’s calculate the annual cash flow and ROI of this legal basement apartment investment -

Annual Cash Flow (Adjusted Rent - Expenses) = $29,190 - $13,140 = $16,050

Return on Investment (ROI) (Annual Cash Flow/Renovation Cost) X 100 =

($16,050/$90,000) X 100 = 17.83%

However, remember that this ROI is just an estimate - your actual ROI can vary depending on your rental property, income, and expenses.

3. KEEP TAX IMPLICATIONS IN MIND

A legal basement apartment might boost your property value, but it also comes with tax obligations. Yes, you must report all rental income to the CRA using Form T776 when filing taxes in Canada. The good news? You can deduct a portion of your household expenses related to the rented space. For instance, if your basement apartment in Welland makes up 30% of your home’s total square footage, you can deduct 30% of eligible expenses.

You can also claim capital expenses, such as major renovations, a new furnace, or a purchased appliance. These cannot be dedicated all at once but must be claimed over several years using Capital Cost Allowance (CCA).

Key Reminder: Claiming CCA on a rental space may affect your ability to claim the principal residence exemption when you sell your home. That means you might owe capital gains tax on part of your home’s sale value.

Ready to Earn Extra Income While Also Becoming a Homeowner?

An accessory dwelling unit in your new home can be a real game-changer. The secondary suite can not only provide extra income (rental) but also help boost the resale value of your house. Hence, if you are already a homeowner, don’t let your basement space go to waste. Use any government programs mentioned above and turn your home’s basement into a legal secondary suite. And if you haven’t bought a home yet, look for houses with a legal basement apartment or at least the potential to add one. A legal secondary suite can be the key to reaching your financial and homeownership goals sooner.