Owner Occupied Options
An owner occupied rental property has some really interesting financing options, as well as creating an income producing asset out of your primary residence. There are a few things that you need to think about before you decide to go down this route. The first relates to the fact that you will have somebody who is renting part of your property living in the same building as you. This could mean that the person will be interacting with you on a frequent basis. You will want to ensure the safety of your family as well as the safety of the tenant. You are also going to want to ensure that the property has excellent soundproofing. You are also going to need to talk to an accountant because of the way that you are going to account this type of property is different than a straight rental.
Adding A Basement Suite/Accessory Apartment
If you currently own a property you might consider adding a legal basement suite, or perhaps rent out rooms in it. This will lower the costs that you are required to pay, and allow you to qualify better for mortgages through different lenders. Once you improve and redevelop a property you may also be able to access additional equity, as well as lower your monthly mortgage payment. Just remember, you will need to make sure to discuss this with your accountant as this will change how the property is taxes.
Case Study -Basement Suite
Roni-Sue has a property in Uxbridge that was valued at $475,000. Being a savvy investor she wanted to capitalize on her principal residence and add a basement suite. Her current mortgage amount is $380,000 @ 3% interest 30 year amortization = mortgage payment of $1598.29 a month. She spends $50,000 in order to put in a nice basement suite, which she can rent out for $1,300 plus utilities.
After the renovations Roni-Sue gets the property appraised for a new mortgage. The new Appraised Value is $600,000.
Her current mortgage is $380,000 she spent $50,000 on renovations. But her new mortgage is $480,000, so she is given a cheque for $50,000, (which she will wisely invest into another rental property). Her new mortgage payment using the same terms as the old mortgage for comparative purposes is $2019 per month. But now Roni-Sue has a rental payment of $1300 per month. So if $1300 month goes towards the new mortgage payment then she will be out of pockets $719 month for the mortgage payment.
Converting the Entire Property to a Rental Property
If she decided to also rent out the top floor and move to another property, she would get an additional $2000 per month in rent + utilities. Which would cover the remaining mortgage payment, property taxes, and insurance on the property. While still providing a tidy cash flow on her old principal residence.
If these is the case already. What has been the benifits of having a basement suite? What have been the draw backs?