Solve Three Challenges with This Home Renovation
We have three challenges in our under-supplied, high demand local real estate market here in Southern Georgian Bay:
- A lack of affordable housing
- A lack of rentals available
- A lack of ‘inventory” of homes to buy but LOTS of investors looking.
There is a solution that can help solve all three of these challenges and that is to add on accessory suites to existing homes. These could be done in the form of apartments inside an existing dwelling depending on the floor plan or, as an addition to an existing house. They could also be purpose built from scratch.
Here’s an example. Let’s say a senior currently owns a home in the Collingwood area valued at about $450,000 but they find it’s getting hard to keep up with the rising costs of taxes, insurance and maintenance. They don’t want someone else living in their home but decide to build a 600 sq ft, 1-bedroom addition onto their existing home. At $150.00 a square foot, that would require an investment of less than $100,000. If the owner took out a mortgage for this amount, amortized over 25 years, the monthly carrying costs plus extra for insurance and higher taxes, would run about $650.00 a month. A new one-bedroom home would rent for at least $1,000 a month in our area giving them added cashflow of $350 a month and, substantially increasing the value and demand for their home.
The same example could be used for a first-time home buyer who needs to improve their cashflow in order to afford more home – if they can access the funds for such a renovation.
Another example would be for an investor or home buyer to purchase an older bungalow in town for $425,000 and then converting the basement or a portion of the house to an accessory apartment. The costs may run about $50,000 depending on what they are starting with. This now leaves two units which collectively would rent for about $2500 a month inclusive or say, $2100 net of utilities. That would be a good return on the original $500,000 or less initial investment and, the property will have increased value and demand upon sale.
In each of these scenarios, the owner is also creating much needed additional rental stock.
Many people don’t realize that in recent years, the Province of Ontario required municipalities to permit accessory units “by right” in single detached homes, subject to conformity with policies in the local zoning by-laws. It is not well-publicized but the time has certainly come to encourage this type of intensification. Why not get started now? As an added incentive, The County of Simcoe offers financial assistant towards the creation of affordable secondary or accessory suites – check it out here.
