Should you buy and move to an income property?
Popular on home and garden television shows, moving into homes and creating secondary suites are making a comeback in the housing market as potential rental properties. Carving space out of attics and basements, homeowners are looking to maximize their homes livable space and maximize income opportunity.
Moving into the Vancouver market is priced high, but rental income can help offset mortgage and homeowner expenses. Both first-time homebuyers and long-term homeowners are looking downstairs as a way to look up on a long-term home investment opportunity. Secondary suites can help a homeowner pay off a mortgage faster and provide continuous income into retirement years.
Amortizing a home over twenty-five years equals interest over that same period. Paying more each month towards that mortgage means interest expense goes down significantly. It can also mean a home’s mortgage is paid off well before the twenty-five year mark. This equates to huge financial savings for a homeowner.
Cost of a Secondary Suite
Limitations are in place when it comes to building a secondary suite. Parking may be an issue for tenants and should be considered, as well as reviewed according to city requirements. Additionally, the physical space must be measured for height (renters do not want to duck) and egress. Typically, these suites require two forms of egress, such as a front door and a rear window well with an escape option. Ventilation must be addressed, as well as electrical, plumbing, heating, cooling, and fire protection. Overall, safety standards must be met by adhering to zoning and bylaw requirements. If a homeowner does not adhere to the legal requirements of building a suite, they will pay dearly, especially when the city becomes aware of the illegal suite and issues a fine or when it comes time to sell the home.
The cost of building a secondary suite can vary, depending on the degree of work that needs to be done to bring the space up to code. Costly retrofitting is often required on older homes, while new builds are sometimes completed as “suite-ready” if a homeowner wishes to finish the space for such a use at a future date. Prices can vary from $10,000 t0 $50,000 or more. Several quotes from contractors are generally advised to visualize the best fit for your home, and your budget. Additionally, each city has bylaws that address secondary suites and additional fees that imposed upon homeowners for such units. These fees should be considered as part of the annual cost of operating a rental suite.
Moving to a home that allows income property
Most often, homeowners roll the cost of renovating a secondary suite space into a new mortgage. Some banks will hold the money until the homeowner can prove that the work has been completed. Other homeowners may choose to use a line of credit to pay for renovation expenses. While either method will require some outright expense to pay for a new mortgage or pay off interest charges for a line of credit, the potential income should far outweigh those costs. Putting that money back into a mortgage will keep you ahead of schedule for paying off your home and building your equity.