The next thing to consider is how you can carve an apartment out of the unneeded space in your home. With some houses, it's fairly obvious. In a two-story home, the apartment can be upstairs. In a ranch-style house built on a slope, the full basement can be converted into an apartment. It's particularly easy if your basement floor is at ground level and you can walk straight out into the backyard.

In large Victorian homes, there is usually one staircase near the front door and narrow back stairs off the kitchen. Either stairway could be used as access to an upstairs apartment. All you'd have to do is partition off the hallways with drywall and doors. If you have a trilevel house, a cozy apartment can replace what you formerly used as a family room and office. All you need to do is figure out where to construct an outside entrance.

You might even split your house in half down the middle, having an apartment in front and another in back or one on the left and one on the right. Then both you and your tenant could have bedrooms upstairs. If your garage once was a stable with a high loft area, it can be converted into an apartment — if zoning in your community permits that use. If your home sits on a huge lot, adding on to your house might be the best solution. The possibilities are endless and a good builder or architect might have other ideas.

Where's the Kitchen?

Occasionally a house was built with two kitchens, but this is rare, and your tenants won't want to cook on a hot plate. So where should the kitchen go? If you plan to purchase a gas stove, the least expensive choice is to put the new kitchen above, below, or near yours so it will be close to the gas line. Same with the kitchen sink — you want it to be close to the water pipes.

If you are going to provide an electric range, you'll probably have to hire a licensed electrician to add a 240-volt line. Ask the electrician whether the new line will also be able to handle a microwave and an air conditioner or if a second line will be necessary.

Remodeling or Adding a Bathroom

Does the space you're remodeling have a half bath? If so, enlarging the space so you can add a shower or tub should be fairly easy. You can put up a couple of new walls, tap into existing plumbing, and let water flow into the existing drain.

Starting from scratch will be more expensive; this involves putting in all new water lines, sanitary and drain pipes, a ceiling vent or fan (required by many local building codes), electrical wiring, bathroom fixtures, lighting, a cabinet and mirror, towel rods, a door, and a shower door or tub enclosure. If the space requires a whole new bathroom, you should also consider adding a separate water heater and separate meters for water and electricity. Then if your tenant likes long hot showers, you won't have to pay for them.

Moving Walls

Will the space you want to rent have to be reconfigured? Will you have to tear down and rebuild walls? Widen doors and a hallway? Put in some closets? What does your local building code say about exits? Some communities require landlords to provide two separate means of egress (exit). How much will it cost to buy lumber and drywall? Do you know how to do the work yourself or will you have to hire a carpenter or builder? Keep in mind that any extensive work may require that you get a permit from the building department at city hall.

Wiring

If you have an older home, is the wiring sufficient to handle today's demands? A hundred years ago one outlet per bedroom was not uncommon, but if those bedrooms are converted into a living area or kitchen, it's definitely not enough. Tenants today come with lamps, TVs, DVD players, VCRs, stereos, computers, printers, electronic video games — the list goes on and on.

You can't snake multiple extension cords into the sole outlet in each room. Even if the tenant wouldn't mind, your local building code probably won't allow it. The code also may require that you hire a licensed electrician to do any rewiring.

It may be in your best interest to rewire your home anyway, however, since your tenant may be apt to overload existing electrical outlets, and that could cause temporary blackouts or, in extreme cases, a fire. Your other option is to consider restrictions on such things as window air conditioning units and additional freezers. Restrictions should also be considered when there's only one electricity meter and you are paying the bill for the whole house.

Utilities

Heat, electricity, water, sewer, and garbage disposal are becoming major household expenses. In some parts of the country, fresh water is scarce. In others, prices for natural gas and oil may be much higher than average.

What happens when your demand for utilities goes up because your dwelling now has two households? Is it practical to add a second water heater and meter? And what about electricity and gas when there's only one furnace and all the power flows through one electricity meter? If you can't separate utilities, figure out how much you will have to add to the monthly rent to cover your tenant's usage.

Laundry Facilities

Will you provide access to laundry facilities — either by letting tenants use your washer and dryer or by installing coin-operated appliances for laundry? Laundry privileges are a nice touch and one that tenants appreciate. But you must decide whether it's worth the additional charges on your gas, electric, and water bills and calculate the wear and tear on your appliances. If you opt for offering laundry privileges, tell your tenant they are available for an additional monthly fee, based on your additional costs.

You also need to figure out what the guidelines will be for when and how the laundry area can be used. What hours and days would work best with your own schedule, and will you permit tenants to dye or dry-clean fabric?

If you have to buy new appliances to make laundry privileges an amenity, be sure to buy a brand that's not too expensive. Cheaper appliances do the job just as well as the expensive ones. The only difference is that they don't have all the bells and whistles.