WHY BUY AN INFILL WITH A BASEMENT SUITE?

Calgary's new infill market has been around since the late 1990s but has really taken off in popularity over the last 15 years. Until recently, however, it was extremely rare to see secondary suites in infills (especially legal ones!), primarily due to city zoning and development regulations. 

With changes to city policies on secondary suites in recent years, things are starting to change! These days, even semi-detached dwellings can accommodate secondary suites as long as the proper permits are obtained.

 
So, what are the main benefits of a legal secondary suite? And why are they becoming so popular?

EXTRA INCOME
A legal secondary suite can be rented out, which provides for extra income that can be applied towards mortgage payments and other household expenses. Unlike illegal suites, which provide additional revenue but can be shut down by the city or pose safety hazards to residents, legal suites are a safe form of revenue for a homeowner. Regardless of the economic climate, having the option for rental income can make a world of difference in affording a particular type of home or neighbourhood. 

Although infills with legal basement suites do generally cost a little more than infills without, the spread is not as large as you may think. Most infills with basement suites only cost $25,000 - $50,000 more than a similar infill without a suite (assuming the suite was added at time of construction). At an interest rate of 5.5%, an extra $50,000 on a mortgage only equates to an extra $305/month. If you are renting the suite out at $1,500 per month, you could see a net income of almost $1200/month (less any rental insurance or other expenses). This is serious positive cash flow!

Generally speaking, buying a property with a basement suite allows you to qualify for a higher purchase price than buying a home that doesn't offer extra income opportunity. However, the exact impact of the basement suite on your ability to qualify for the loan depends on how much the suite can be rented out for, as well as the policies of your mortgage lender. 

Most lenders do not require any kind of lease agreement up front, but instead will order a "market rent report" to have a third party estimate a typical rental income for the property. Then, typically anywhere from 50-100% of that rental income can be applied towards the income needed to qualify for the property. Assuming a basement suite can rent for $1500/month, and a lender allows for 100% of this to be applied towards qualifying, this equates to $200,000 in borrowing. This means a buyer who qualifies to purchase a home at $650,000 without a suite could potentially qualify to purchase a home at $850,000 with a suite that rents for $1500/month. 

ABILITY TO HOUSE A LIVE-IN NANNY
A legal secondary suite also allows a much more comfortable way to accommodate a live-in nanny while still allowing some privacy after-hours. Many live-in nannies would prefer to have some alone time when they are off the clock, and many families like to enjoy some privacy as well. A secondary suite's bonus is that when the kids are grown and the nanny moves on, this space can be rented separately or used differently.

MULTI-GENERATIONAL USE
A secondary suite also works well for multi-generational homes, when members want to maintain some privacy and autonomy from the main household. In these cases, having a second kitchen and a private entrance can give families that added separation. Sometimes, we see secondary suites housing ageing parents or grandparents. Sometimes we see the reverse - with older, grown children opting to utilize the suites while in school or beginning their career.

IMPROVED RESALE VALUE
Another appeal of having a legal secondary suite is improved resale value – especially if the home has been designed with flexibility in mind. Having the option for additional rental income, housing extended family members, or just being able to entertain this for the future is starting to become very attractive to today's home buyers. This demand is also forecasted to increase over time. Therefore, the added investment of having a legal suite remains whether or not you choose to utilize it, meaning it will still be a feature you can highlight in the future if you decide to sell.

FLEXIBILITY OF USE
Depending on the secondary suite's design, many can work just as well as normal additional living space if you choose not to rent out separately. However, having the option for a suite can be invaluable, as it is not usually feasible to add this later on. Therefore, buyers with an eye on the future tend to appreciate the option of being able to rent things out later or invite ageing family members to move in down the road without having to relocate.