On the West Shore when you hear the phrase secondary suite, it’s usually attached to the words “mortgage helper.”
The presence of suites in new and established homes continues to be an attractive selling feature for buyers and those selling such houses, in combination with the relative lower prices compared to properties closer to Victoria.
Darren Day with ReMax Camosun points out that for every $450 of rent one receives, it’s worth roughly $100,000 of borrowed money at today’s interest rates.
“Let’s say you’re looking at a home priced at $500,000 to $600,000 that has a suite. When you factor in what you’re getting for the rent, it’s like paying $350,000 for the house,” he says. “Houses with suites are way more attractive to buyers because of that.”
New-home developers continue to target buyers looking for a little more house than they might otherwise be able to afford, but willing to take on the landlord’s role.
Mike Holmes, managing broker for Pemberton Holmes Realty West Shore, says some people buy a home with a suite and take over the space, while others choose to live in the suite and rent the larger space.
“At the end of the day it’s about the income potential,” he says.
On the West Shore, as with heavily populated Saanich and Victoria, there are also many older homes with suites. Most municipalities have largely ignored their presence and continue to do so unless complaints about parking or noise prompt them to take action.
On the other hand, municipal encouragement to construct building-code friendly secondary suites is a relatively new concept, meant to promote density and affordable housing. Compared to the previous generation of in-home suites – which buyers should include on any pre-offer home inspection list – suites created as part of new homes’ design provide more added value, Holmes says.
“A legal suite is worth more than an illegal suite,” he says. Then again, he says, “Older homes with suites, if they’re planned well and constructed well, they have additional value over those without a suite.”
When it comes to building legal suites, Westhills offers a variety of options for would-be landlords. The massive Langford subdivision has given buyers other choices on top of the traditional upstairs/downstairs format, from separated two-bedroom carriage homes to one-level separated suites with an alley entrance that sit behind the main house, designed for older family members or people with mobility issues.
“From Westhills’ perspective, suites address the issue of housing affordability and flexibility in terms of family structure,” says marketing director Rohan Rupf. “In terms of affordability, it acts as a mortgage helper so that a family could get into a home with three or four bedrooms and have a tenant, however, they can still afford to pay for it.”
Q: HOW MUCH RENTAL INCOME CAN BE USED WHEN APPLYING FOR A MORTGAGE?
Since 2010, lenders using the Canada Mortgage and Housing Corporation to guarantee mortgages use only 50 per cent of expected rental income when qualifying buyers who put less than 20 per cent down on a home purchase.
However, CMHC is not the only company that guarantees mortgages for lenders.
Other sources, such as Genworth Canada, guarantee up to 80 per cent of the rental revenue, depending on the lender, according to Realtor Darren Day.
While it always pays to shop around for mortgage rates and terms, it’s also important to know your options as a borrower, he says, especially if you’re a first-time buyer who’s trying to break into the housing market.
GREATER VICTORIA MARKET UPDATE »
MONTH-TO-DATE, AUG. 5/14 COURTESY VICTORIA REAL ESTATE BOARD
» 54 / 540 — NET UNCONDITIONAL SALES / TOTAL, AUGUST 2013
» 107 / 935 –NEW LISTINGS / TOTAL, AUGUST 2013
» 4,459 / 4,593 — ACTIVE RESIDENTIAL LISTINGS / PEAK AUGUST 2013