Without a doubt, Toronto real estate is very valuable as an investment. Even in an unpredictable market, we expect property values to rise as the popularity and population of the city grows. Add recent immigration policy to the mix, and it’s easy to see that real estate is one of the best investments anyone can make in their future. However, you don’t have to go out and buy a second property to generate income as a homeowner.

You already have everything you need right within your walls. Turning your primary residence into an income property can be the easiest and safest way to break into real estate as an investor.

Secondary Suites: An Overview

In 2022, the provincial government introduced legislation to make it easier for homeowners to add secondary suites to their existing properties. It is one way to address the growing housing crisis. Secondary suites add to the supply and tend to be more affordable than renting an apartment or condo.

For a homeowner, adding a secondary suite gives you a chance to generate income and build your equity. You’ll also enjoy a payoff if you decide to sell down the road. A house with income potential has more resale value than one without!

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Types of Secondary Suites

In short, a secondary suite is an entirely separate addition to an existing home that you can rent out. It could be a basement apartment, a studio suite over the garage, or an attic suite. Under the new laws, you can even build a garden suite in your own backyard. Previously, these buildings were called laneway suites and were only allowed if your home had access to a publicly dedicated laneway.

Under the new rules, the city is even providing funding in the form of forgivable loans of up to $50,000 to encourage homeowners to construct garden suites! The loan can be forgiven 15 years after your first tenant moves in.

What You Should Know Before Building a Secondary Suite

Though investing in a secondary suite has many advantages, it’s not the right path for everyone. Before you dive in, here are some questions you should ask yourself.

• Are you willing to be a landlord? Don’t let stories of nightmare tenants scare you away from becoming a successful investor. Most people are happy to find a place to live and will work cooperatively with you so they can stay in their homes. However, you should be prepared for the maintenance and to handle any disputes that arise from time to time.
• Can you cohabitate peacefully with a tenant? Unlike having a roommate, you don’t have to share spaces like the kitchen or bathroom. There are separate entrances, and you don’t even have to see each other if you don’t want to! However, you do have to be prepared for a certain amount of noise and may have to make concessions regarding pets or guests. 
• How much work will your home need to accommodate a secondary suite? There are legal guidelines you must follow when constructing an apartment within your existing home. Building it to code can take a lot of work, but some buildings are more conducive than others for housing multiple families. For example, if your home already has a finished basement with a four-piece bathroom, turning it into a legal apartment might not be overly cumbersome. Otherwise, it can run as much as $75,000 to convert an unfinished basement into a liveable space you can rent out.
• Are you in it for the long term? Investing in a secondary suite will almost certainly pay off in the long run, but it will take time. It isn’t easy to earn a significant return on investment in the short term.

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Investing in real estate can take time and patience, but most importantly, it takes knowledge. Our investment series can help you make informed decisions:

• What Successful Toronto Real Estate Investors Have in Common
• How to Succeed as a Toronto Real Estate Investor
• Is the Toronto Real Estate Market Shifting?

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The Advantages of a Secondary Suite

As you can see, building a rental unit on your existing property is not without its challenges. However, homeowners all over the province are investing in secondary suites. For many people, the potential upsides far outweigh any disadvantages. For example:

• You can generate passive income. Passive income is the gold standard of any investment, and a secondary suite is one of the most accessible ways to achieve it. Once you find the right tenant, the money comes in automatically every month without your effort or time.
• Your equity will grow faster. Homes with income potential grow in value faster than other residences. The value of your property can far exceed the amount of money you put into it within a few short years.
• The resale value is higher. Your home will usually sell faster and for a higher amount when you demonstrate the income potential to a prospective buyer.
• You’ll have extra space for family and friends. If you ever decide not to rent your secondary suite, you’ll have an incredible guest space for entertaining out-of-town guests. 
• You can enjoy a secure financial future. You can always consider moving into your secondary suite if you ever decide to downsize. This leaves you free to rent out the rest of the house, which could fund a comfortable retirement, leaving you free to travel or pursue your other dreams.

Do you want to invest in your property without being a landlord? Find out what renovations really add value right here.

The Next Step

Building is one option if you’re eager to get started with a secondary suite. Your other option is to buy a house with a legal apartment set up. Your upfront cost may be higher, but everything is done for you. All that’s left is to find your ideal tenant and start living the investor’s life! 

In either case, a local real estate agent can help set you up for success from the beginning. If you decide to buy, they can help you spot the perfect opportunity within your budget range. If you build, they can put you in contact with every professional you will need. You’ll have access to everything from skilled tradespeople to home inspectors to ensure your unit is legal and up to code. 

It may surprise you, but many real estate agents can even help you find the right tenant to make your investment profitable for years to come.

Do you have questions about secondary suites or other investment opportunities in Toronto? A free, no-obligation consultation is a great way to start. You can book your free meeting with us below.