Continuing with the HGTV theme, another one of our favourites is Income Property, hosted by Scott McGillivray. Scott walks homeowners through the renovation process by adding an income suite to their property, whether in the basement or another location in the home.
If your lifestyle allows it, (it’s not for everyone), adding an income suite to your home can have tremendous benefits. Applying the income from the rent directly to your mortgage substantially reduces borrowing costs. The principal is paid down quicker and equity in your home increases faster. An income suite can also increase the value of your home, and energy costs can also be reduced by splitting the costs with the tenant.
An income suite can also increase your borrowing power. CMHC allows 50% of the rental income from legal-secondary suites to be used when qualifying for a mortgage. Purchasing a home with a turn-key rental suite in it, is recognized as a source of affordable housing. It allows the buyer a chance to live in a single family dwelling. Since your buying power increases you might be able to afford a nicer home and or in a more desirable location than wouldn’t have otherwise been possible.
Here’s another scenario:
Let’s say you purchase a 1000 square foot home in the community of Acadia for $500,000. It has a secondary suite that brings in $950 per month in rental income. You put a 20% downpayment, which allows you to avoid the nasty CMHC insurance and your monthly payment over 25 years at 2.5% is $1906.
Now lets apply the rental income to the mortgage. Your're now able to reduce your mortgage payment to $956 a month. The rental income covers a massive 50% of your mortgage. In order to have had an original mortgage payment of $956 a month your original downpayment would had to have been 60% of the purchase price. There can be huge financial gains having an income suite in your home. The $950 monthly rental income removes about $200,000 of mortgage costs. On the flip side…you’re now a landlord.
Consider this as well. Traditionally the only way of earning income through a suite has been to rent to a full-time tenant. Due to the advancement of technology, more creative options are now available.
According to Airbnb they’ve hosted more than 60 million guests in more than 34,000 cities worldwide. Why not have some of that rental income go into your pocket.
Hosting allows you tremendous flexibility to earn income from your property. Unlike having a permanent tenant, you can choose the dates that you wish to host. You can rent per night, week, or month.
Many individuals are taking advantage of this income-earning potential by having students, business professionals, and tourists rent out rooms and or suites in their private home.
Depending upon which area your home is located, a basement suite can get you north of $1200 per month in Calgary.
You don’t have to worry about getting paid. Payment is guaranteed. Both companies broker the deal for you. Guests register online and payment is done on their website.
Whether you choose to rent your suite in the more traditional way, or use these new services, consider these factors. There is the added cost of insurance, personal safety, liability, home safety, taxation, and unclear local laws. Due diligence on your part is required.
Having said that, it is our opinion that the return on investment out weighs the negatives. If you are searching for an income property or if you have any questions, contact us. We are happy to help.