Housing affordability has been a big-ticket news item these days. As real estate prices in Canada continue to go up, it’s becoming more and more common for homeowners to take affordability into their own hands.
One of the most popular ways to improve housing affordability is with a secondary suite in your home. In this post, we’re going to talk about everything you need to know when building a secondary suite in your home or buying a new home with an existing secondary suite.
Let’s dig in!
First of All, What is a Secondary Suite?
As the name implies, a secondary suite is a secondary dwelling located on your property. It can be a basement or attic apartment, loft space over the garage, or even a smaller detached guesthouse, tiny home, or coach house (more on those later!)
Secondary suites are sometimes referred to as nanny suites or in-law suites, however, there are some differences between those types of dwellings. For example, it is possible for a family member to have their own suite in your house, but they might not pay rent or have their own kitchen, laundry services, or private entrance.
Interested in real estate investing? Check out some of our other blogs to help get you started:
- Buying Real Estate Vs. Investing in Stocks in 2021
- Our Guide to Condo Assignment Sales
- Important Clauses to Add to Your Lease
Legal Vs. Non-Legal Secondary Suites
Depending on the type, secondary dwelling the rules can be different. To be legal, all secondary dwellings must be registered with the city of Guelph under the Additional Residential Dwelling Units Bylaw.
All units whether existing or to be created must obtain a building permit. Additional units are currently only permitted in R.1, R.2, and R.3B residential zones. So you are unable to have an accessory apartment in R.3 townhouse zoning.
There are different regulations on the size of the unit and what is required depending on if the secondary unit is in the main house or a separate building. The fees will also vary depending on the type of unit and whether or not the owner lives in the home. For more information please refer to the City of Guelph by-laws here.
Making your unit legal may be more work and cost more money but there are several advantages to having a legal unit:
- You have peace of mind that the city isn’t going to show up and inspect your property and potentially disallow it or make you do costly renovations.
- It will decrease your liability.
- You can use the rental income to help qualify for financing.
- It will increase your home’s resale value.
The real estate market changes fast! Here are some of our recent posts every investor should read:
- A Complete Guide to Real Estate Investing in Guelph
- Growing Your Wealth Through Real Estate Even in a Recession
- Negotiating With Tenants as a Guelph Real Estate Investor
- Could Buying During A Recession Be A Genius Investment?
Return on Investment on Secondary Suites
Adding a basement apartment or secondary suite is a very smart investment. Typically, a basement remodel to get it up to code as a secondary suite costs about $30,000-$40,000 to install. However, in most cases, the value of your home will also go up by $40,000 at least with a basement apartment.
Additionally, a secondary suite makes your house more saleable because buyers will be drawn to the added income that comes with the apartment.
There are very few investments that will provide you with such a strong cash-on-cash return. For example, Typical one-bedroom apartments in Guelph rent for about $1,600-$1,800 per month, while two-bedroom apartment rents for $1,900-$2,200.
That means, if you were to build a $40,000 two-bedroom basement apartment in your home and rent it out for $1,800/month, that would be a 54% cash-on-cash return.
Whether you’re planning a secondary suite or just looking for some high-value renovations, always consider the return on investment (ROI). Here are a few blogs to get started:
- What are the Best Ways to Increase the Value of Your Home
- Renovating Vs. Selling Your Home As-Is
- Upsizing: Is Now the Right Time?
What About Coach Homes?
In 2020, the City of Guelph legalized the use of coach homes. These are dwellings that exist outside of the main dwelling but on the same property. As a standalone structure, the codes and regulations for coach homes are more strict. Coach homes are also restricted in many other areas in Ontario.
However, coach homes are still an amazing investment if you’re allowed to build one like we are in Guelph.
For example, in Guelph, a coach home would probably cost between $100,000-$150,000 to build. You should also be able to generate $2,000 per month or more on rent. This is a 16-24% cash-on-cash return.
Now imagine the return if you installed a basement apartment and a secondary suite!
Some Things to Consider
If you’re thinking about building a secondary suite or coach house, it’s not as easy as just putting down the money and reaping the rewards. Here are some logistics you need to consider first:
- Are you ready to be a landlord?
- Do you have savings put away for an emergency repair fund?
- Are you prepared to go through to correct municipal channels to register your secondary suite?
- Do you have experience with building and safety codes? Or are you prepared to outsource these tasks to a professional?
Practical Tips for Building a Secondary Suite or Coach Home
When building your secondary suite or coach home, it’s important that you understand the rules, regulations, safety, and building permits required. You can take a look at the City of Guelph’s guide here.
Some other practical knowledge to have includes:
- Is your area desirable to renters? Most renters like to live close to work, schools, hospitals, and amenities.
- Does the layout and construction of your home support what is needed to attract renters? For example, a private entrance, large egress windows, new appliances, soundproofing, etc.
- Is your property connected to municipal water or are you on a well and septic system? Rural properties do not make good candidates for secondary suites.
At GoWylde Real Estate, we’re experts in real estate investing. We can help you realize your dreams of becoming an investor with our deep knowledge of the local Guelph and TriCities market as well as our extensive experience with the Landlord-Tenant Act. Learn more about investing with us here.
