Second Suite

The Hidden Costs of Investment Properties

We believe that owning an investment property is a great decision for many people. There are some hidden costs that investors do not consider when looking to get into rental properties, and we will take a look at them today.

Maintenance and Upkeep

This is a big hidden cost of investment properties that many people overlook. According to the US News the average homeowner spends between 1 and 4 percent of their homes value on maintenance and upkeep. The older that your home is the higher some of the costs can be. Our second home was built in 1978, and there are a few updated that we will need to be making in the upcoming years. We need to replace the fence and update the backyard this summer, and will need to re-shingle the roof in the next 5 years. Both of these project will cost between 4-10K dollars each.

Of course, you don’t have to put money into up keeping your property, but doing so will have a negative impact on the amount of rent you can get, and the type of person willing to rent from your hovel. Home upkeep is always worth doing.

And make sure that your keep all of your receipts! The benefit of maintenance and upkeep on a rental property is that it is all tax deductible! This is a business expense!

Property Tax

Even though you may not be living on the property, you do still have to pay property tax. If you want to find out what your yearly property tax will be you can check it our here for Calgary, Vancouver, and Toronto.

You will want to make sure that you incorporate your property tax into your monthly mortgage payment costs so that you can accurately decide on a fair rent.

Income Tax

Yes, the money that you get from your rent is taxable. Some people skirt this by getting paid under-the-table, especially with illegal suites, but please trust us, it is not worth it.

If you are interested in turning your illegal suite into a legal one learn how to get started here.

If you have a spouse, you can split the income between the two of you if you both have ownership in the house. Before you make any decisions in this area however, I would highly recommend that you talk to a chartered accountant on how to best organize your investment properties.

Conclusion

We hope that you feel more prepared for the costs that are involved in rental property ownership. Wit this knowledge you should be able to better judge your properties and make sure that you can make the most amount possible with them.

Happy renting, and tell us your stories in the comments!

Legal Basement Suites: Calgary – The First 4 Steps

Many people are interested in adding a legal basement suite to their homes but are unsure where to start. You already know the value that having a legal secondary suite can offer you, now it is time to get this process started! In this article we will take a look at the steps needed to begin building your suite.

Step 1: Make Sure Your Home is “Suite-able”

Not every home can be turned into a legal basement suite, although regulations have recently changed making this process simpler than ever. The City of Calgary has many regulations that need to be followed to ensure that the homes people live in are safe. And if you are needing to make major changes to the house in order to meet those requirements, it may not be worth it for you.

We wrote an article on The Top 3 Requirements for Adding a Legal Basement Suite to Your Home that you will want to take a look at. It looks at the three biggest potential challenges that homeowners face. The City of Calgary website also has a list of requirements that can be found here.

Once you feel confident that you could add a legal suite to your home, you are ready for the next step.

Step 2: Get Quotes from Contractors

Whether you decide to use a professional General Contractor, or contract the suite yourself, you will want to get some quotes. I would recommend a minimum of three.

Having a professional take a look at your home is valuable for a few reasons. Firstly, they can point out things that you may not have caught. A good contractor should have an idea of the legal requirements to suite a home, and will be able to quickly see what steps need to be taken. They can help you imagine where rooms or kitchen sinks could go, and will also be able to point out some of the challenges you will need to find solutions for.

Secondly, it is really important that you get quotes from multiple contractors, as they may have differing opinions or suggestions on how to suite your basement. You can take all of their unique ideas into consideration, and mix and match them if you like.

When my wife and I were looking to buy our second home, we were pretty sure that the home could be suited, but the first contractor we brought in said that it could not be done. This was obviously some disheartening news to hear, however when we had our second and third contractor come to look at the house, they both said that the home could easily be turned into a suite. We ended up buying and suiting the home with very little hassle. This example goes to show that you want at least a couple opinions!

Thirdly, you can get a better idea of the actual cost of suiting a home. Average out the quotes that you get, and you should get a fairly accurate idea on how much it will cost to do the renovation. If you plan on contracting the home yourself, and doing a bit of the work then you could take 15%-30% off the prices that you are quoted.

Step 3: Create a Floor Plan

Make sure that this is the suite that you want it to be! Whether you hire a contractor, or do it on your own, make sure that you are a part of this process. The City of Calgary site has examples of what a floor plans should look like. They can be made using professional programs, or could even be submitted hand drawn on graph paper, so long as you follow the guides.

I would recommend measuring the space with a tape measure and drawing your own plan on an iPad. You can easily make changes and adjustments on the fly, and see what you think would be best for the space. If you are a fan of the life simulator The Sims then you will really enjoy this part of the process.

Spend a little time fiddling with the plans and show it to family, friends, and other professionals to get their thoughts. Make as many tweaks as you want to during this process, but know that whatever you submit is what the finished product needs to look like. Dayna is very good at creating floor plans and laying out spaces efficiently, so feel free to get in touch directly for our feedback too!

Once you feel happy with your floor plan it is time for step 4.

Step 4: Apply for Permits

You can find the steps to apply for a permit on the City of Calgary site here.

Although the idea of applying for a permit may seem daunting, it is actually a really simple process. All you need to do is fill out a basic application form, and submit the floor plan that you made, along with the site plan (a drawing of the entire property and what is on it). Twice.

Make sure you bring two copies of your floor and site plans as you are applying for both a Developer Permit as well as a Builders Permit. You can either submit your permit in person or online. I went in person. Although there can be a bit of a wait, your permit gets reviewed by an engineer while you are there and they can let you know if there are any changes that you need to make immediately. It still goes through a full approval process, but I found it to be quite educational.

No need to worry about plumbing or electrical permits unless you plan on doing that work yourself. The person you hire will pull those permits on their own when they need to.

Once your permits have been approved then you are ready to build a basement suite!

To Sum It Up

Although building a legal basement suite might sound like a scary undertaking, once you break it down into smaller parts the process actually isn’t all that challenging. Once you have finished this, the next task will be actually building the suite, which is a fun and rewarding process.

How did you find starting a Secondary Suite? What problems are you currently facing? Let’s talk about them in the comments section below. We’re happy to help however we can!

Airbnb Rental Restrictions in Vancouver With New Short-Term Rental Laws

In April of 2018 the City of Vancouver imposed new short-term rental laws. They seem to be aimed directly at the growing use of Airbnb use in the city. What do you need to know about these new laws? And what kind of impact with this have on the city? We will be looking to answer these questions below.

UPDATE: The laws are now in effect, and the city has seen over 1,000 adds pulled off of Airbnb! Hopefully this change brings more long-term rentals into the city.

The New Laws

The new laws say that if you want to rent out your home for less than 30 day periods then you will have to apply for a a “Short Term Rental Business License”, which costs $56 to apply for with a $49 yearly renewal fee. You will have until August 31st of 2018 to apply for this license, and those who do not have it come September could face fines up to $1,000 a day per infraction. Wow. Vancouver really means business with this.

A few other caveats worth pointing out is that this business license will only be given out if you are renting out your primary residence. If you own a rental property, or even a legal basement suite, you will not be allowed a license.

One other interesting fact is that if you are renting out your property to a tenant, your tenant could sub-lease your suite if you allow it. You may want to make sure that you add an addendum on sub-leasing in your contracts if you have not done so already.

Why Is Vancouver Doing This?

As much as it is easy to look at this as an immediate negative, especially for people who mainly use their rentals properties as Airbnb rentals, there are some benefits for the city as a whole. Vancouver is an amazing city to live in, and they are currently dealing with big housing shortages. This new law is designed to make sure that there are more rental properties available for people to live in the city long term.

Airbnb is still being regulated back to being used for it’s original purpose; to rent out a room, or your home when you are away. The City of Vancouver is looking to grow the city for the long term, and that is a great thing, although it might cause some short term pain for Airbnb landlords.

What are your thoughts on this new law? Are you ready for it? Let us know in the comments below.

Top 3 Entrance Options for Legal Secondary Suites

There are many different ways that you can provide an entrance into your legal secondary suite, but there are also rules that must be followed. Today we will take a look at secondary suite entrance regulations, and what types of entrances we would recommend.

Regulations

Calgary

In Calgary, the city regulations state that;

The main residence and suite must have at least one exit that leads directly outside. This may be a door that leads to an exterior stair or a door to a common set of interior stairs that is separated from both the main residence and suite.

A stairway used in an exit requires a minimum width of 860 mm and must have at least one handrail.
Handrails should be mounted between 800 mm and 965 mm above the stair. The height is measured vertically from the front edge of the stair tread.
At least one light fixture that can be switched both on and off at the top and bottom of the stairs is required.
A landing must be provided at the top and bottom of all stairs. The landing must be at least 860 mm long and at least as wide as the stairs.

Doors serving the exit are required to be a minimum of 810 mm wide and 1.89 m high. Utility rooms, laundry rooms, furnace rooms and all other doors leading to the exit must also be at least 810 mm wide.

Vancouver

In Vancouver, there are not as many regulations on entrance and exits, and there is no section dedicated to it. However there were two related regulations that I was able to find. They are;

A minimum existing ceiling height of 6’6” is required over 80% of the suite area and all exit routes.
Self-closing devices are required on any interconnecting doors between the principal dwelling unit and the secondary suite.

Toronto

Toronto also has only a few regulations on entrances.

Façade: The exterior façade cannot be significantly altered. For example, adding a second and separate front door may not be permitted.
Size: The Second Suite must be a self-contained dwelling, and in some municipalities(e.g., Toronto) it is required to occupy an area smaller than the owner’s unit. The Second Suite must also have a separate entrance and contain proper kitchen and bathroom facilities.

Basically, your suite needs to have a separate entrance, and you can not add a new door to an existing home.

Although Toronto and Vancouver’s regulations are a bit less detailed than Calgary’s I would recommend using the regulations that Calgary has as a guideline for other cities unless specified elsewhere. Following the Calgary guidelines will basically ensure that you are meeting the safety codes that are needed.

Entrance Types

There are three different entrance options that we will be taking a look at, and I will be ranking them from most to least ideal for a legal suite. Your home is ultimately going to be the biggest deciding factor on what kind of entrance you can have. But if you are building a new house, or looking at homes to purchase, take these thoughts into consideration.

1. Separate Out Door Walk Out Entrance

There really is no better entrance to a home than this. Whether it is a Garage Suite, or a Basement Suite, a walk out entrance does a great job separating the properties and making them feel like their own unique spaces.

For this to work in a basement suite your property would need to be sloped so that the basement at the back of the house becomes ground level. I have personally found that the best basement suites have this feature, as they also allow for big windows and lots of natural light.

2. Common Space Entrance

This is an entrance that you may see commonly in some of the older 4-Plex houses. There is one common door to get you into a common space, and then stairs leading upstairs to the top level of the home, and stairs leading downstairs to the bottom level of the home.

There is nothing inherently wrong with an entrance like this, but it does mean that you and your tenants may be seeing each other than you might like, as you leave during the morning commute. If it means that you can add a secondary suite to your property though, then it is worth it.

3. Separate Entrance with Stairs

This is probably the least ideal entrance to a suite that you can have. Many of these entrances are steep and narrow, making it challenging to bring furniture in and out of the suite. It’s also worth remembering where you live. Canada gets cold, and these entrances need extra maintenance to keep the ice off, and they also need proper drainage at the bottom of the stairs to allow the water to escape. These entrances are also almost always made out of concrete, so if there is any aspect of the entrance that is not up to code, the cost to upgrade is pretty high.

If your entrance is up to code, and the rest of the property is great, then don’t let this deter your legal suite aspirations. This kind of entrance will still work, just make sure that you are ready for the extra steps involved.

To Sum It Up

So long as you make sure that you home follows a few simple regulations, you can easily ensure that you can put a legal suite in your home. There are many ways that you can put a separate entrance in your home, and the more separate you can make them the better.

Please let us know your thoughts in the comments below!