For many moms who are juggling family life and finances, your basement can seem like an untapped opportunity for extra income. Plenty of people convert basements into rental units, and some even add a separate, private entrance. A basement rental unit can provide a steady stream of income to offset your mortgage payments or fund family activities, but it’s not a simple transformation. You can’t just paint the walls, add a few rugs, toss in some furniture, and list it for rent like a normal bedroom in your home.

Converting a basement into a legal, habitable rental unit requires careful planning with a focus on safety. If you’re considering renting your basement, here’s what you need to know before you start that conversion.

1. Basements aren’t easy to convert

The number one reason to pause before renting your basement for rental income is the difficulty involved in the process. Not only do basements take work to convert into habitable living spaces, but if you cut corners and skip code requirements, you could put your tenants’ safety at risk.

Basements require extra work to convert because they’re prone to unique issues like security, flooding, mold, mildew, and inadequate ventilation. For instance, windows and doors need extra security, and the whole area needs to be waterproofed.

When it comes to emergencies, basements can be difficult to exit. It’s important to install proper exits, like egress windows, in a basement apartment. But you can’t just cut an extra hole in the wall anywhere you want. Since basements are humid, every hole will invite moisture. It has to be done correctly.

With that said, a basement renovation can help you generate passive income if you do it correctly. However, if you skip the legalities, you’re more likely to lose a lawsuit if you get sued later on, and code violations can come with hefty fines. A basement rental unit is only advisable if you’re willing to renovate your basement to code.

2. Rental laws are complex

If you’re a first-time landlord, managing a basement rental won’t be as simple as it seems. Between federal, state, and local landlord-tenant laws, you’ll have a lot to learn. Since the learning curve is steep, it helps to work with an attorney or property manager.

If you already own additional rental property, consider hiring a property manager to handle all of your units, including your basement rental. The more properties you own, the more cost-effective it is to delegate your landlord duties.

If you don’t like the idea of being a landlord, a professional property management company will do everything on your behalf. For instance, Green Residential, a Houston property management company, offers full-service management packages that make owning rental property mostly hands-off. With a property manager, you won’t even need to collect or deposit rent. And you won’t need to worry about making a costly mistake that violates the law. Professional property management teams know landlord-tenant law and have an attorney on retainer to inform them of any new changes. You can’t go wrong when you hire a pro.

3. Check zoning regulations

Even when your home is in a residential area, your property might not be zoned for a rental unit. Some areas have restrictions on accessory dwelling units (ADUs) and basement apartments are subject to even stricter regulations. For example, in Seattle, a basement apartment has to be smaller than the primary residence and no bigger than 1,000 square feet.

Regulations also dictate minimum ceiling height, and dimensions for egress windows. In most cases, the electrical system and plumbing need to be separate from the main house, which requires installing separate meters, electrical panels, and water heaters.

4. A basement apartment can increase property value

Depending on who you ask, a basement rental can generate an ROI of around 88% after five years, and can increase the sale price of your home by around $40,000. Although a basement renovation can cost between $50,000 and $75,000, you’ll recover the difference in monthly rent over the years.

5. Screen tenants to high standards

Even though your basement will have a separate entrance and you may not see your tenants that often, it’s crucial to screen applicants to high standards. They’re still going to be living in your property with you and your family, so you want someone reliable and trustworthy. If someone raises red flags, don’t rent to them.

Turn your basement into a smart investment

While it’s not an easy or cheap project to turn a basement into a legally habitable rental unit, there are financial benefits. Basement units are easy to rent, you’ll have regular income, and it gives you a good reason to increase your asking price if you decide to sell.

Although it takes hard work, by understanding your legal obligations, prioritizing safety, and choosing the right tenants, you can create a profitable basement rental.