Income Suites 101 – Part 1
Want to add value to your home and make some monthly cash flow? In my opinion there’s no better way than with income suites.
Risks vs Rewards
A legal income suite increases the value of a home in a number of ways.
Adding an attractive, well-kept apartment can increase your home’s resale price, particularly in an overheated market. When housing prices are high, the income the purchaser can make will mean that your property is affordable to more people. In fact, banks consider legal rental suites as qualifying income, which often turns non-approved or marginal buyers into mortgage-qualified ones. And that means more bids for the home seller, which in turn means a higher selling price.
Even if you’re not selling right away, you can see immediate benefits to adding a rental suite. The income it generates can reduce your mortgage and increase your equity. (And since the banks consider this rent to be additional income, your mortgage ratio is lower – increasing your ability to borrow or invest in properties if you wish.) Rental income can also allow you to hold on to a home in order for it to appreciate in value. (And actually, that’s the traditional principle at play in real estate investing: income properties largely pay for themselves as the unit increases in value over time.
Risks vs Rewards
Like all investments, there are risks associated with income properties along with the rewards. The rewards are pretty obvious: cheques to the bank! But you have to be willing to put in the extra work to earn that extra money. You can’t cut corners. If you do, the income suite and landlord-tenant relationship is going to be a difficult process and a disaster in the long run. You’ve got to be ready to be a landlord and to acknowledge that some of your house is now the personal space of other people. Of course, you should always maintain your home so that you can live comfortably and see your house’s value increase. But when you have tenants, you also have an obligation to them to keep your entire home clean, safe and properly maintained.
For most people, it isn’t the idea of maintenance as much as the thought of having strangers living under their roof that is off-putting. The truth, however, is that the rules and regulations that apply to the design of income suites creates spaces that are truly separate – living in a house with an income suite is like living in a condo or a semi-detached house.
Next Article: Part 2 – Where to Buy?
Read more about Income Suites
Part 3 – Financial Feasibility
Part 4 – More About the Numbers