Can I add a secondary suite to supplement my mortgage payments?

For-rentIf you are thinking about a secondary suite to supplement your mortgage payments here are a few tips to make sure that you buy the right property:

Bungalows rule and fortunately for us in Calgary, they are one of the most prominent styles of homes in the inner city that enables secondary suites. The layout of typical bungalows allows a separate (often rear) entrance that accesses the lower suite without intruding on the main floor occupant. Even better, if the layout allows for common access to the furnace, storage and laundry areas then this saves duplicating these areas on each floor. Try to find a raised bungalow with large windows for naturally bright suites and separate lower entrances for higher rental value.

In Calgary 42+ feet of frontage offers security of high resale value. When you buy in the inner city you pay primarily for the lot value which increases over time and you pay little for the value of your bricks and mortar which depreciate over time. The fact remains that your income over time will be derived solely from the building utility and rental value. Eventually the value of the lot will exceed even the value of this cash flow. When the time for redevelopment arrives you will be pleased you paid the extra bit for a fifty foot frontage lot because they can be neatly subdivided into two separately titled building lots. Kinda like having your stocks split!

Don’t discount the value of a garage. Often the rental return on the value of  a garage can be many times the equivalent return on the value of the house. A double garage and larger shop-type garages especially those that are insulated and heated are highly sought after by many tenants.

Utilities are commonly paid by the primary (upper) occupant and a percentage reimbursed by the lower tenant sometimes dependent on the number of occupants in each suite (often 60-40 upper to lower). Best case scenarios offer separate furnaces for each suite and separate meters for heat (gas) and electrical. This keeps tenants tenants happy and minimizes potential for inequity.

Watch out for these gremlins when shopping:

Use your nose – if the basement smells damp or musty it could be a sign of mold. This is an issue that an inspection will often reveal  however be sure to instruct the inspector to probe thoroughly if you suspect mold which can be a costly repair.

Look at the location of heating vents if the heat is forced air (common). Is there a proper return air vent from a location at ground level in the suite that feeds the furnace? Are there heat registers at the outside perimeter feeding the coldest spots in the room (typically each window)? If these conditions do not exist you may be in for some discomfort for bot upper and lower occupants as you continually struggle to balance the heat and keep both units comfortable.

Windows are one of the primary causes of heat loss and discomfort. Check that older windows have been properly maintained and function properly.

Parking can sometimes be an issue depending on the location and if parking on the site is restrictive. Extra on-site parking will help to avoid any issues.

One of the primary factors is to purchase a property that has an existing suite built prior to 1973 and which has been in continuous use as a rental suite since that time. This can assured by checking the City records and how the City classifies the property on your tax bill (one or two residences). Checking this will provide some assurance, but no guarantee, that your secondary suite will not be shut down due to non-compliance as the use will have been grandfathered.