Have you been thinking about the best way to invest in real estate? If you live in a single-family home that you own, the answer may be under your nose. By renting out part of your house as a self-contained living space, you can start earning extra monthly income and help secure your financial future. Known as a secondary suite, this unit (usually in the basement) will contain a separate entrance—along with at least one bathroom, kitchen, and sleeping area.
Is building a secondary suite right for you? Here are some of the major pros and cons to consider…
Constructing that secondary suite can have some distinct advantages. The first is passive income. Taking on a tenant will allow you to charge monthly rent, which can offset your mortgage payments and other major living expenses. If you want to charge a higher sum (and put more money in the bank), you may even choose to live in the smaller portion of your home.
There are also potential benefits to owning a secondary suite in retirement. In addition to helping you boost your long-term savings, a legal unit can add significant resale value to your property. If you remain in your home and find yourself facing mobility challenges one day, you may also find that your suite is an easier living space to manage over time.
Last but not least, you can include the income that you’ll bring in through your secondary suite when you apply for a mortgage. That’s worth keeping in mind if you’re in the market now!
While there are plenty of pros associated with owning a secondary suite, there are also a few potential cons. The first is the fact that you’ll be sharing your property. While the separate entrance and amenities provide more than enough privacy for many landlords, some aren’t entirely comfortable with the idea.
Another thing to consider is the income you can bring in. While it’s bound to be significant—and very helpful—it probably won’t be quite as much as you could get for another type of rental property.
If maximizing the return you’ll receive on your investment is your top priority, you may want to consider other home types. Though (of course) acquiring one will almost certainly be more costly than taking advantage of an existing unit in your home. On the other hand, the renovations required to create a legal secondary suite can be pretty costly. It all depends on your current layout. An experienced contractor can help you understand how much work will be involved.
If you want to keep things legal and above board, your secondary suite will have to adhere to local building and fire codes, as well as zoning bylaws. Be aware that the specifics (such as lot size and parking requirements) may differ from one jurisdiction to the next. In other words: do your research, and get in touch with your municipality if need be.
You should be aware that you’ll also need to submit an application and additional materials as required. While there are a few steps in the process, the result is well worth the effort—but only if a secondary suite is right for you. So make sure you do your homework and speak to the right professionals (which could include a contractor and your legal counsel, among others).
Don’t forget: if you’re in the market for a home that could accommodate a secondary suite, a local real estate agent can guide you to the ideal place—and help you understand local rents!