For decades, Toronto’s dynamic real estate profile has adapted to meet the needs of the city. One byproduct of this evolution, which is directly visible in today’s housing landscape is the prominence of secondary and laneway suites.
Purchasing a property that includes an existing income suite, such as a basement apartment or laneway house, can be uniquely beneficial from an investment perspective.
For Toronto buyers who haven’t yet considered purchasing a home with a built-in secondary suite, here are three unique advantages to take into account.
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A Note on Laneway Homes
Laneway homes are a relatively new category of property in Toronto’s continuously shifting real estate profile. For those who are unfamiliar, laneway houses (which may also be referred to as garden suites) are detached, self-contained properties built in the backyard of an existing home – often accessed directly through an alley or laneway.
From an investment and lifestyle perspective, laneway homes offer a number of the same advantages as traditional secondary suites. Although they are currently less prominent than their counterparts, laneway homes will certainly become more common as demand for housing within the city continues to escalate.
1. Alleviating Mortgage Costs
One of the forefront advantages of purchasing a property with an existing secondary suite or laneway home is income. By hosting tenants on the property you’ll be able to capture an impressive stream of passive income. This income can then be used to offset a substantial portion of your mortgage or other living costs.
As elevated interest rates have deterred a larger volume of potential buyers from entering the market, reliance on rental properties has surged. This increased demand has allowed average market rental rates in Toronto to reach new heights, with no signs of decelerating in the near future.
As knowledgeable real estate agents who directly specialize in supporting investors, we can assist you in optimizing the cash flow of your secondary suite. Incorporating our proven systems of efficiency, we’ll calculate the most profitable pathway for your investment. Then, we’ll equip you with the insights and resources to make it happen.
2. Enriched Equity
Beyond the lucrative recurring income earned with a basement suite or laneway home, a home purchase of this type allows buyers to seamlessly elevate their equity in the long term.
When you buy a home in Toronto, you’re already making an exceptional investment. As one of the most active housing markets in the world, simply owning a tangible, high-demand asset such as real estate allows you to build and nurture your personal wealth well into the future.
In addition to the expected appreciation of value as dictated by the market, having a basement suite or laneway home will automatically elevate interest from buyers when you elect to sell down the line – leading to higher, top-dollar offers.
If you buy a property with a built-in suite, you will be well set for a profitable future sale without needing to invest the initial capital or labour involved in installing one. Alternatively, building a secondary suite or laneway home (if the property doesn’t have one) can also provide the same long-term advantages.
3. It’s an Easy Gateway to Property Management
With the proper preparation and set-up, your basement suite or laneway home can become a nearly automated source of income. If you’ve ensured that the apartment is in fitting condition and done your due diligence in sourcing a reliable low-risk tenant, you can expect a fairly hands-off management experience.
While you will have certain landlord duties, secondary suites and laneway homes are generally far less intensive than larger investment properties. With this in mind, attached basement apartments make for a straightforward and accessible entry point into the world of real estate investment and property or tenant management.
It’s entirely understandable that some buyers may feel hesitant or skeptical about the prospect of tenant management, however, it’s often much easier than they realize.
As landlords and real estate investors ourselves, Ramsay Real Estate Group can provide you with easy-to-follow, actionable guidance on mastering your role as a property manager.
Planning a strategic upsize from your existing property to your next? Explore these resources from our site.
Insights From a Veteran Investor
While purchasing a home with a built-in basement suite can make for a strategic addition to your investment, it’s critical to be aware of the various requirements involved in owning and operating one.
First and foremost, any kind of secondary suite must be legal. This means adhering to a myriad of regulations, building codes, and other fine print. It’s estimated that more than three-quarters of basement suites in Toronto aren’t up to standard. Regardless of how tempting it may be to take shortcuts, operating an illegal unit could lead to serious financial or legal trouble.
Before you buy, speak to our team. We’re well-versed in the underlying legalities of building, owning, and operating these kinds of investments. If you’re interested in a particular home that includes an existing basement suite, we’ll help you determine whether or not it’s legal, profitable, and worth your interest.
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