Imagine if you could make your mortgage pay for itself. With a rental suite, this isn't as far-fetched as it sounds. The income generated from a secondary suite can be substantial enough to offset a large portion of your monthly mortgage payments. This makes owning a home more financially manageable, especially in high-cost areas—take all of British Columbia, for example.
The mortgage-helper
With an additional source of income streaming into your bank account each month, you may even find yourself in a position to accelerate your . So, you could pay off your mortgage sooner than expected, freeing yourself from the shackles of home loan debt. Plus, you'll be saving on interest over the life of your loan.
Handling your debt
When you decide to , your debt-to-income ratio becomes more favourable. How? Lenders consider the income you receive from your tenant when calculating this ratio, effectively increasing your income. This could make you eligible for better lending rates or allow you to borrow more if you choose to invest in another property.
If you're thinking this all sounds too good to be true, it's important to remember that adding an accessory dwelling unit and becoming a landlord isn't all roses and revenue.
To renovate or not to renovate
Creating a rental suite may involve renovations and that means upfront cost. But think of it as a long-term investment. Over time, the rental income can cover not only your mortgage payments but also the cost of the renovation. And if you ever decide to , a legal secondary suite could increase the value of your home. It reaps benefits now and in the future.
To sweeten the deal even further, in 2024 ÎÚÑ»´«Ã½ launched the secondary suite incentive program. If you meet all of the , you can get a forgivable loan of up to 50% the cost of renovations or additions related to adding a secondary suite to your property, with a maximum payment of $40,000. Plus, the cost to add a suite to your property must be at least $20,000.
For the full list of details, visit the and see if you qualify. But some basics to know before you apply include:
- The suite must be on the same property as your principal residence that you own in an of British Columbia.
- All registered homeowners must be Canadian citizens or permanent residents.
- Your home’s assessed value must be less than $2,150,000.
- The combined gross annual income of all registered homeowners on title of the principal residence must be less than $209,420.
- You must have received a building permit on or after April 1, 2023.
- You must rent out the completed suite to full-time tenants at for at least five years.
The suite you add can be a laneway house, garden suite, basement unit or another type of suite, but it must contain a kitchen and full bathroom and be independently accessible.
This is currently a pilot program. In the first year there’s $40 million total available, enough for 1,000 applications if all of them qualify for the maximum amount. Remember, you still need to follow all building codes and regulations for secondary suites in your area. If you already built your suite after April 1, 2023 but didn’t apply for the loan yet, you can start submitting your documents now.
The not-so-fine print
While the financial advantages of having a rental suite are compelling, it’s vital to know that landlords have responsibilities too. From ensuring the suite is legal and meets building codes, to maintaining the property and addressing tenant concerns, the role comes with its share of commitments.
Keep in mind, too, that you have tax obligations on rental income and will have to report it. Plus, while you can get tax breaks for some expenses related to improvements you make when adding a rental suite—like maintenance, repairs and other items—be careful when listing these to avoid an audit. When in doubt, ask an accountant.
It's essential to understand and to treat this endeavour like the mini-business that it is. But don't let this put you off—with careful planning, becoming a landlord can be a rewarding and profitable venture. By renting out a suite in your home, you’re helping your own financial situation and contributing to the supply of rental accommodation.
While property prices continue to rise, homeowners in ÎÚÑ»´«Ã½ can find stability in the revenue a rental suite generates. So if you've been thinking about how to soften the blow of a hefty mortgage, perhaps it's time to consider the idea of becoming a landlord. A rental suite could turn your home into a source of income and pave the way to greater financial stability.
Remember, no two property journeys are alike. It's all about finding the right fit for you and perhaps your future tenant.
At the end of the day, a rental suite can turn your home into a powerful financial tool. It can help offset mortgage payments, improve your debt-to-income ratio, accelerate your mortgage payments and even provide some tax relief. But more than that, a rental suite can transform your life and the lives of others.
This article originally appeared on .
