Category: rentals (2)

IMG_0088My relationship to secondary suites began before I did. Ortona is a town in Italy that Canadian forces liberated and my parents were resided in the adjacent town of Fossacesia. WW2 left the area in ruins and it held little promise for a young couple to grow a family. When a relative sent news from Calgary and partly due to their fondness for Canadians, they set sail for Halifax. Arriving in Calgary with a few dollars to their name, they discovered accommodation was scarce and at a premium. They found a makeshift suite in the attic of a two storey home offered by a fellow immigrant. It was sparse and barely insulated, but in relative terms from the war-torn area they had just left, they were very happy to have the accommodation. My Mom would comment later in life that while living in that hobbled suite, they had some of the best times of their life.
Sometimes adversity is a blessing. During the war my father was interned in a prisoner of war camp, but the experience had taught him to speak and write English. As a result Dad got on quite well here and ultimately sponsored many of the Italian immigrants who wanted to start a new life in Canada. My parents would often share their suite with new arrivals until they landed on their feet and before long they were able to purchase a home on Child Avenue where I began my life. We always had a relative or friend living in the basement of that home which helped them all get started financially – it was just the perfectly normal thing to do.
A few years passed and my parents purchased a lot where they built a new home. It was a traditional raised bungalow perched high above Bridgeland with a walkout basement and a separate entrance for a secondary suite. At first we lived in the suite while my Dad finished the larger main floor area. In those days you paid for things as you had the money, so it took some time to build and pay for the home but in the meanwhile the suite provided comfortable accommodation. Once the main floor was finished we moved up and they set out to rent the suite. With no shortage of new immigrants moving to Calgary the suite hosted young couples from France, Denmark, Germany, Poland and Italy. As a child I was a curious participant in every activity around our home. I’m sure that I was mostly a nuisance to our tenants, but I always participated in their activities building or fixing everything imaginable. I fondly recall rebuilding engines, a ski-do (from scratch), and I was always made to feel like I was a big help. These wonderful people who resided in our suite became a part of my life and extended family. Outside our home our immediate neighborhood was almost entirely a community of new immigrants; Italian, Austrian, English, German, Polish blended with First Nations. We never thought twice about helping each other for any matter whatsoever. And it was more than perfectly normal to have a suite or let a room to someone who needed a place.
My parents always charged below market rent, so most of our basement renters stayed until they saved up a down-payment for their own home, which they all did. After they moved out we would see them nearly as often, as they frequently stopped by on weekends for dinner and a friendly game of cards.
In time, as the family aged, my parents preferred more privacy and the suite lent itself to teenage independent living. It was also a handy place for a rock-band to rehearse while shutting out those pesky parents. At times it just remained vacant, but always available for extended visitors or a returning child. Later still it would have provided perfect accommodation for a caregiver for my parents.
You see, I’ve always had nothing but good, positive experiences from secondary suites. To me they are a device that enables us to interact positively and directly with our neighbors – helping one another as we naturally would. It connects us and weaves a tighter fabric into our community. Suites provide adaptable spaces that can serve many purposes and extend the utility and value of our homes. (Did you know that the latest trend in home building is adaptable design?) They extend the life of our residence as an investment, allowing for greater return. They allow a new home buyer to purchase a home worth $200,000 more for the same monthly cost due to the rental income. They provide facility for people aging in place, saving both the resident and our government the cost of health care facilities. They provide affordable housing for new immigrants, students, temporary workers and caregivers. They provide elderly a resident eyes and ears to help look after the place (and help boost their retirement income).
When we look at affordable housing we often imagine a housing continuum from most to least affordable. It begins with shared accommodation and boarding houses (mostly extinct now); then secondary suites; apartments, townhomes and finally single family homes. Today, Calgarian’s have a dire need for affordable housing. With the cost of building at an all-time high it seems improbable that we will find a solution to construct apartments or townhomes that are affordable. If this accommodation does not exist, then the increased cost of living is passed on to employers and ultimately consumers and taxpayer – so we all pay or we simply don’t attract new workers and immigration and the accompanying burden this places on our economy.
We have a solution to affordable housing that exists today and costs little to implement. The answer has been right under our nose and yet somehow we have buried it, creating new rules that confuse and class existing suites illegal. And through nothing short of NIMBYism we have restricted the development of new suites. There is no question that the suites need to be safe and we would never argue on issues of safety, but somehow claims of unsafe suites and parking have been grossly exaggerated. A vocal minority has helped perpetrate these urban myths without substance and stymied an open debate where we lay the facts on the table. This issue over secondary suites now appears to have become a political dilemma for Councillors and we owe kudos to those who have shown leadership on this issue. Our City needs this accommodation and any outstanding issues can all be easily addressed but we all need to give our politicians the permission to do the right thing. The right thing now is to legalize suites in all zones. To appease the residents in single family zones, simply adding the provision that in existing single family areas suites shall be allowed only in owner occupied homes settles the score. Calgary is one of the only Cities in North America with such a restrictive secondary suite policy. It’s time we progressed back to our heritage, where suites are embraced as a vital and necessary part of our community.

real-estate-market2

With national forecasts citing an overheated market in decline and calling for a further correction in real estate values, it’s curious to watch the Calgary Real Estate market out-perform most every other City and region in the country. Much of this performance is due to the hang-over from the recent run of strong net in-migration, due to a buoyant job market in Alberta. The question is when will the hang-over end and will Calgary succumb to the negative national trend despite our favourable geography and oil economy?

Calgary employment  growth for 2013 is forecast to decline, yet remain positive at 2.3% with net migration for Calgary expected to slow to just over 15,000 over the next two years. This steady stream of new residents has fueled an increased demand for rental accommodation resulting in an apartment vacancy rate under 1.3%. This all points to a positive, yet somewhat reduced pace of activity that fuels the Calgary real estate market.

With the recent surge in rental activity and subsequent increase in rental rates one could be tempted to purchase rental property based on the recent higher returns, but are these rents sustainable for the long term? We advise that any rental properties are evaluated using conservative rent estimates especially those based on furnished rentals. Also note that vacancy for furnished rentals is similar to that of Hotel properties (in the 20-40% range) so don’t be fooled into using unfurnished vacancy rates and applying these to furnished properties, despite our current hot market. One exception could be buying rental properties that have a high component of land value, especially in inner city communities. These properties could derive good income from the building for many years, yet the land value may surpass its’ income value, if the trend toward inner-city community development continues.

Farmland also has potential as a solid income producing vehicle, but be sure to know what you’re buying. While crop rents have increased dramatically (proportional to crop prices), soil types, local geography, irrigation and overburdened crops all have a profound effect on the return a farmer can extract from a section of land. Again there may be other exit options for farm land such as future development potential or subdivision to smaller parcels. This can yield large returns but not for the faint of heart or uninitiated. If you are not the expert, be certain to obtain expert advice (the cost of which could yield you the best return for your investment).

One of the best strategies today for those who already hold real estate is to optimize your investment. That means reducing your operating costs and improving efficiency of the property. Some of the greatest benefits can be derived from reducing the energy requirements and  greening your real estate. This not only reduces your consumption and cost of energy, but also improves the desirability of your property. Green Calgary offers a valuable home audit that provides excellent advice on greening your home and reducing its energy footprint. With the cost of solar electric continuing to decline we are now coming into an age that photo-voltaic systems are becoming cost effective. It won’t be long before you may be asking “how much energy does this property generate and how much income does it produce?” Don’t overlook these possibilities and the potential value of solar exposure when evaluating your next  property.

Overall, it appears that the market may reduce from a rolling boil to a slow simmer over the next few years which calls for a return to a more sober, long term view of any real estate investment. Reducing operating costs could help you weather future bumps in the road, and exploring alternate exit strategies can add tremendous value if the need for Return Of Investment becomes more important than the need for Return On Investment.