Secondary suites can expand income and homebuying power

Mortgage broker Chris Richards and his wife added a secondary suite to their home when their adult children moved out.

His intent was not only to make use of the extra space, but also to follow the advice he gives, particularly to first-time homebuyers, that secondary suites can expand both income and buying power.

"It is especially important if the house they actually qualify for – say, for $275,000 – doesn't exist in Calgary. When you include rental income from a secondary suite, that can raise the home buy to $350,000."

Richards, who works for Quantus Mortgage Solutions, says under new Canada Mortgage and Housing Corp. rules, total projected rental income from a legal suite can be added to a homebuyer's income when applying for a mortgage.

"It is especially important if the house they actually qualify for – say, for $275,000 – doesn't exist in Calgary. When you include rental income from a secondary suite, that can raise the home buy to $350,000." - Chris Richards, mortgage broker

This homebuying option has garnered increased attention thanks to city council's decision to allow secondary suites (including basement, main level and backyard suites) as discretionary use in all districts, while establishing a mandatory suite registry. A two-year amnesty period allows existing illegal suites to be made legal and safe, with waived registry, development and building-permit fees.

John Mayberry, a Calgary REALTOR® with CIR Realty, has sold many homes with suites, and says these types of properties give first-time homebuyers a place to live, plus help paying the mortgage.

Ultimately, he says, many purchasers build equity (often half or more of the mortgage comes from rental income) then buy their dream home while keeping and renting out the entirety of the original home.
"It becomes their retirement income," he said.

Currently, most available suited homes, he says, are in the northeast and neighbourhoods around the inner-city core, such as Mount Pleasant, Capitol Hill, Huntington Hills and Acadia.

Few are currently available for sale in outer suburbs, "though we just sold one in Douglasdale," he said.

Richards lives along a golf course near the Bow River, and his next-door neighbour also has a secondary suite. While the challenges of being a landlord are not for everyone, he recommends multiple research tools and offers his own personal experience as an investor to clients.

In the end, growing demand for suited homes comes with an important realization: "You either have to make more money or spend less," said Richards. "Today's kids are becoming more thoughtful about spending."

And, with several financing options out there, Richards says some homes with illegal suites are worth purchasing – depending on the area – and making legal, because costs can be recouped from the increased home value.

Calgary communities with the most registered secondary suites