# Buy rental property or build secondary suite



## rustyspoon (Aug 3, 2017)

Hello, I'm a new member, and this is my first post. What a great forum!

I'm hoping I may be able to get some advice...

I'm going to proceed with my first rental property. I have a choice to make. I can buy a single family home in a decent area for approximately 200k - 250k. This will fetch anywhere between $1200 - $1500 per month in rent.

Alternatively I can build a double car garage behind my own home with a second floor above with a 2bdrm apartment. This will cost me 120k. My province will pay me 35k to do this which will bring my cost down to 85k. This will fetch rent of approximately$1000. I live in a very desirable central area that is sought after by owners and renters.

The choice seemed obvious at first but there is one concern. If I buy the single family home it can appreciate and eventually be sold. The secondary suite may or may not increase the value of my own property but cannot be sold independently.

What would you do?


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## Mortgage u/w (Feb 6, 2014)

I do not consider a single dwelling to be much of a rental property. If you go that route, consider a multi-unit property.

I think the choice is obvious. If you can obtain $1000 a month with an $85k investment? - I would take 10 of those!
Your cash-flow will be far greater and exceed the benefit of appreciation. 

I would build the suite, collect enough rent to eventually have a good amount to put down on a multi-unit in the future.


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## fireseeker (Jul 24, 2017)

rustyspoon said:


> My province will pay me 35k to do this


Hi Rusty, what plan is this??


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## CalgaryPotato (Mar 7, 2015)

I'm having a hard time believing you can only rent out a single family home for $1500, but you can rent out an above garage suite for $1000. 

If that's the case it's a no brainer to build and rent out the garage suite.


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## rustyspoon (Aug 3, 2017)

fireseeker said:


> Hi Rusty, what plan is this??


What do you mean by plan? If you are referring to the program- it is a program put forth by the manitoba governement. Search "Manitoba secondary suites program"


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## rustyspoon (Aug 3, 2017)

CalgaryPotato said:


> I'm having a hard time believing you can only rent out a single family home for $1500, but you can rent out an above garage suite for $1000.
> 
> If that's the case it's a no brainer to build and rent out the garage suite.


I know- it seems hard to believe. In Winnipeg currently, 250k buys you very little. Houses in that range would be a stretch to rent for anymore than 1500 monthly. An above garage suite if 2 bedroom and approx 600 sq feet in a decent area would be a very fair price. It would also abide by the program regulations for affordable housing to qualify for the grant. I have built a few secondary suites for others. All have been rented at comparative amounts and fully occupied since construction completion. The oldest one being a basement suite of just under 700 sq feet rented for $950/month since 2009! I should also mention, typically a suite like the one Im thinking of would cost a little more to construct, however I own a design-build company so am able to complete the project for a little less.


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## rustyspoon (Aug 3, 2017)

Mortgage u/w said:


> I do not consider a single dwelling to be much of a rental property. If you go that route, consider a multi-unit property.
> 
> I think the choice is obvious. If you can obtain $1000 a month with an $85k investment? - I would take 10 of those!
> Your cash-flow will be far greater and exceed the benefit of appreciation.
> ...


Thank you for the advice. I agree- multi family is the way to go. Im currently saving my pennies to build a 4 plex!


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## Just a Guy (Mar 27, 2012)

The 250k property you suggest doesn't cash flow long term, so it's a no.

As a long term landlord, personally I'd never want a tenant anywhere near my family or stuff, so I'd also steer away from the second option, despite the cash flow. Some things just aren't worth the money. 

I'd be patient and look for the right property at the right price to come up...they always do if you are looking properly and are ready to pounce.


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## OnlyMyOpinion (Sep 1, 2013)

rustyspoon said:


> ... What would you do?


I'd ask your neighbours if they are fine with having someone living in your backyard and adding 2 vehicles to the neighbourhood parking, noise, wandering cats, dog ****, etc.

I can't believe the number of cities approving this kind of 'densification'. It is all about growth at a cost - the cost being the detriment of established, tax-paying communities. Areas designated R2 and greater were planned that way. R1 communities were not.


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## tygrus (Mar 13, 2012)

Just a Guy said:


> As a long term landlord, personally I'd never want a tenant anywhere near my family or stuff, so I'd also steer away from the second option, despite the cash flow. Some things just aren't worth the money.


Keeping an eye on your renters is priceless. You can watch them all day long from your window to make sure they dont destroy something. And easier to catch them at home when they skip rent.


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## Just a Guy (Mar 27, 2012)

The reverse is also true, they know when you're home or not, when you're away an extended time period, when your kids are home alone...


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## cynthia99 (Sep 18, 2017)

Hi, guys!
I am new in Calgary. I have to buy a rental property and my budget is $2500 for a single family home. I need your suggestions.
Thanks in advance.


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## OnlyMyOpinion (Sep 1, 2013)

Buy ... $2500 ... single family home?
I'd see if Home Depot has any of those nice garden sheds on sale. Fall is usually when they clear them out.


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## investigal (Aug 25, 2017)

To the OP - the garage suite seems the better choice between the 2 options you have given. I'm curious after the addition of the garage suite, and this being your principal residence, if you were to sell in the future will you owe taxes on the sale of the suite?


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## nobleea (Oct 11, 2013)

investigal said:


> To the OP - the garage suite seems the better choice between the 2 options you have given. I'm curious after the addition of the garage suite, and this being your principal residence, if you were to sell in the future will you owe taxes on the sale of the suite?


I have done the garage suite (in Edmonton). We didn't have a 35K grant program. The costs and rent are in line with what I got.
The rent for a full house is also similar to the numbers he mentioned. I don't know if it needs to be a 2BR unit. We did fine with a 1BR. The key is to make sure it's well designed and have decent finishes.


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## twa2w (Mar 5, 2016)

cynthia99 said:


> Hi, guys!
> I am new in Calgary. I have to buy a rental property and my budget is $2500 for a single family home. I need your suggestions.
> Thanks in advance.


Could you please clarify.
Are you buying a rental property and you have a budget of 2500 per month for payments, or did you miss a few zeroes on your post and you mean 250,000.
Or you are looking to rent a house and your rental budget is 2500 per month.


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