There four reasons why I love in-law suites.
I came back from a meeting with a client to give him ideas on renovations you can do to create an in-law income suite. The idea here is to make some renovations to create a $1400 rental income out of that basement. This is based on data for the neighborhood they live in and what others are getting for their basement income suites. Here are four reasons why in-law suites are great.
1 - Creating Additional Income
In this case, a $1400 rental income multiplied by 12 that's $15,000 approximately, 15-16 thousand a year of additional income.
2 - Forced Appreciation
You're adding value to your home or to your income property.
3 - Additional Income to Pay Down Your Mortgage
Think about it. If you are putting $15,000, $16,000 a year as a lump sum or a pre-payment on your personal residence if you live there or that specific income property, you are going to pay off that mortgage significantly faster than 25 or 30 years.
4 - Use Additional Income to Qualify for Investment Property
The fourth part is you can use that additional income to qualify to buy an investment property. The banks and the lenders will look at that additional income that's coming out the income suite to help you qualify for the next purchase.
Who would benefit from in-law suites? If you're a move up buyer, let's say you are living in a condo downtown Toronto and your condo's worth $600,000-$700,000 and you're paying maintenance fees of 5-6 hundred dollars a month then you know for you to get into the free hold market.
Buying a detached or semi-detached and renting that basement is going to make that transition a lot easier because you're getting that additional income which would offset your costs. Now keep in mind the $1400 of rental income on a monthly basis carries approximately $300,000 mortgage. That is significant. Let's say you buy a home, a house for a million bucks and you have $1400 coming in from the basement, that $1400 carries $300,000. So really you're buying $700,000 but the difference here, the $1400 would subsidize and cover the costs of $300,000 mortgage.
If you're an investor, creating an additional unit, taking a single family home making it into a duplex, now you're generating additional income, you have higher cash flow and again that can help you qualify for future and potential investment properties purchases.