Interest rates going up means that anyone renewing their mortgage in the next few years will face higher monthly costs. One way to mitigate these costs is to put an income-generating apartment in your house.
Because interest rates are high, it also means that there are a lot of potential tenants out and looking for places to live who no longer qualify for mortgages. These apartments aren’t cheap to build. But they can be worth it in the long run, especially if you’re in a position where you have some extra money in investments, and you want to invest in your home instead.
This likely isn’t the time to refinance your home to get cash for these renovations because your carrying costs will be high. However, if you have money that you want to invest somewhere, this is a great way to do it. Not only will you earn passive income, but you’ll also be improving the value of your property significantly.
Basement Apartments
These are the most common rental units that we see in Toronto. To make it legal and safe it has to be renovated with permits and comply with fire code, ESA and planning dept at the City.
Ensure It’s Legal
Most of the basement apartments in Toronto are not legal. However, your home insurance will not thank you for renting an illegal basement apartment. It is best to do it legally so that your liability is covered in case the tenant is injured in the basement. The basement apartments that get the highest amount of rent look modern and have a lot of light (pot lights are your friend). Ideally, your apartment should have a separate bedroom space with a window and a closet. Depending on the neighbourhood, a lovely one-bedroom basement apartment in West Toronto can rent for up to $1800/ month.
Consider a Laneway House
This is a more significant investment, but the payoff is also larger. The city of Toronto is fast-tracking these laneway houses to increase the density in our city. Laneway houses can often be two-storey homes with basements. They are large homes in their own right and can often rent for $5000/ month or more. If you build a laneway house, ensure you do not take all the parking away from your property, which would negatively affect value. Instead, retain a parking spot for the main house and build the laneway house around that. Bonus points if you keep two parking spots, one for you and one for the laneway house.
Look Into Garden Suites
The city of Toronto finally approved garden suites in February 2022, so we’re all still a bit new to these. These houses are located in your backyard, without access to a back laneway, unlike laneway houses. For safety reasons, the path from the front of the house to the garden suite must not be narrower than 1 meter and must be forty-five feet from the public sidewalk. In neighbourhoods closer to downtown, where the spaces between houses are tight, garden suites will not be feasible. However, garden suites in areas with larger lot sizes, such as High Park, Mimico, Sunnylea, and most communities in Etobicoke, will be a great way to make some income from your backyard. Unlike the laneway houses, where tenants would enter their home via the laneway, with garden suites, you’ll need to share your backyard with your tenant.
Looking for more information about boosting your home’s property value? Check out these blog posts.
- How to Maximize your Property Value with Renovations
- The Impact of Professional Staging
- What You Need to Know About the Pre-Listing Phase
If you opt to build a laneway house or a garden suite, you can apply for a forgivable loan of up to $50,000 from the city. The loan will be forgiven after fifteen years from the beginning of a tenancy, and you must have a tenant in the property for at least fifteen years. Here is a link to more information about this program:
Your home is an excellent investment! Secondary rental suites not only improve the value of your investment but also contribute to the rental market housing pool, which is much needed in Toronto.
Robyn VanderVennen
The Kim Kehoe Team
