You’ve decided to take the plunge and purchase an investment property in Edmonton. The next important decision to make is what kind of home you’re going to buy.
There are a lot of things to consider here, but we feel that suited homes come with a lot of benefits you may not have considered.
- What is a Suited Home?
- Two Sources of Income
- Cover Down Payment Cost
- An Appealing Home for Many Tenant Types
- The Location Does Matter
- Financial Requirements
- Average Rental Rates
- Greater Resale Value
- What You Need in a Suited Home
- Mechanical and Home Systems
- Provide a Comfortable, Safe to Tenants
- Keep Family Close
Let’s take a look at some of the benefits of Suited Homes and what they have to offer.
What is a Suited Home?
A suited home is one house with a separate, legal secondary suite. Other names include in-law suites, basement suites, basement apartments, secondary suites, or even granny suites.
Sometimes, buyers choose this type of home with the intent of living in the main part of the home and renting out the secondary suite. This makes owning a home more affordable.
This design is also popular with investors because they can rent to two tenants and create two income streams.
Two Sources of Income
This is one of the major benefits of owning a suited home as an investment; two sources of income. You're collecting money from two tenants. And even though there are two separate living areas in your suited home, you can purchase the property by utilizing a single mortgage.
Plus, they are much more convenient and economical than renting out two separate homes, usually located in different areas of town.
Renting out your suited home means you get extra rental income to put toward paying off your mortgage sooner. If you go through a period where only one of your suites is rented out, you’re still getting income from the other suite and not left holding a vacant property.
Cover the Cost of Your Down Payment
If you plan on using a Home Equity Line of Credit from your primary residence or another property as your source of down payment, a suited home may be able to cover that interest cost for you.
Suited homes produce excellent monthly cash flow giving you as the investor the ability to service the cost from the line of credit, which in turn means you’re more likely to be able to get a property that will give you the ROI you really want.
An Appealing Home for Many Tenant Types
Suited homes are gaining in popularity with investors, as they have a lot to offer the rental market. They are more private and quieter than an apartment condo. Tenants also love all the features - the fact that there is some yard space, and in many cases a garage. These types of homes usually also offer more square footage for a renter, and we all know space is important!
There are many considerations to take into account if you’re considering a suited home as a real estate investment, so let’s take a look at them.
The Location Does Matter
One of the top considerations is the location. Is the home located near businesses, shops, restaurants and schools? Does the neighbourhood feel welcoming with attractive surroundings?
Other questions to ask:
- Are there playgrounds nearby for families with young children?
- Does the neighbourhood have green space and/or walking trails?
- Is there easy access to public transit and/or major roadways?
- Are there grocery stores and other amenities nearby?
- What kind of entertainment options are close?
Of course, you need to consider the financial requirements connected with owning a suited home. As the owner/landlord, you are responsible for the property taxes, property insurance (separate from tenant insurance which is up to your tenant to get on their own), management costs, building maintenance costs and, of course, the mortgage.
If you look at a cost-per-unit basis, a suited home has a lower price than two separate properties, which make it a much more affordable option. After expenses you should still be left with a healthy monthly cash flow to pad your account or reduce your mortgage principal reduction.
You also have to be able to qualify for the mortgage. The good news is with a suited home, the income you’ll earn from renting out that space counts toward your income in the mortgage qualification process. This is a great opportunity!
Here’s a breakdown for you, with the key numbers:
Average Rental Rates
Depending on the community, rental rates can range from $1,500 - $1,700 for upper suites and $900 - $1,100 for lower suites and several are also getting extra income for the garage.
Most of our investor clients are charging between $400 to $500, in addition to the net rent amount, for utilities. The cost for this is then split between the upper and lower suites, making it much easier for everyone to stay on budget.
Discretionary costs include vacancy, repairs and maintenance and as always, it's a good idea to keep a healthy reserve fund on hand.
Greater Resale Value
When it comes to Edmonton real estate, suited homes are popular with investors and we expect that to continue for a long time. There are not a lot of really great homes with legal suites for sale out there, but there is a consistent growing demand and a lot of people who want to buy one.
In particular, modern new construction homes with basement suites are very sought after.
That means when it comes time to sell, if that’s what you choose to do, you’ll be able to sell your current investment property for a much higher value than if it didn’t have a secondary suite. The extra living space and secondary income opportunity will put your property in high demand.
What You Need in a Suited Home
When looking at a suited home as an investment there are some key things that must be considered:
Your tenants are going to need to have a place to park. You want to make sure you have a spot for both of your tenants.
- Does the home have a garage?
- Is there a driveway?
- Will they share?
- Is there street parking?
- Does one get the garage and the other has to park on the street?
It’s always a great idea to have a designated parking plan for your tenants. Make sure both parties know exactly what is expected of them.
Mechanical and Home Systems
It’s extremely important the suited home you’re looking at has a separate air exchange/furnace system with separate heating controls for each unit. No one wants another person responsible for the temperature in their home!
You also want to make sure each suite has separate laundry facilities, so each tenant has their own laundry space. Stacking washer/dryer combos are a great solution for this as they can fit in a much smaller space than a side-by-side system. Common area laundry facilities are not a tenant favourite and most often don’t offer the convenience tenants want.
Same goes for the mechanical room. A common mechanical room that is outside of both suites is ideal. This gives you (or your maintenance people) access at any time without disturbing your tenants.
Lastly, make sure each unit has its own smoke alarm, carbon dioxide detector, hood fan, and other important items.
This should be a top priority. One of the biggest concerns a tenant has is noise from other tenants – which is why apartments have such a bad rep! Privacy is a key component for everyone and with a suited home it becomes even more important. When your tenant wants to binge the newest season of Unsolved Mysteries on Netflix, they don’t want it to be drowned out by the Marvel marathon happening upstairs.
If you purchase a suited home that doesn't take these items into account on the floor plan, you may be asking for unwanted tenant issues, which could cost you time and money.
Provide a Comfortable, Safe Home to Tenants
Though there are some costs associated with being a landlord, there are many more gains. Not only are you boosting your cash flow by renting out two suites in your suited home, but you’re also providing a comfortable, safe place to your tenants and their families.
Keep Family Close
Many people are choosing to keep family members, like parents who are moving out of their own home, close by having the whole family move in together.
A suited home is a perfect fit for tenants who need this type of set up. Owning a suited home as an investment rental property gives you a big advantage in this niche of the rental market.
Have all of these great benefits got you thinking about buying a suited home? Luckily for you, we can help with that! We help investors build new construction homes that produce solid results. TriUrban has a lot of great options in Edmonton and surrounding areas with secondary suites.
All of our suited homes are brand new construction, located in neighbourhoods we’ve purposely chosen because they are convenient, safe, and friendly. They have separate entrances and are completely soundproofed. The tenants get their own laundry, kitchen, and temperature controls and your mechanical room is located outside of the suites.
If you aren’t really sure about the process of buying or building a suited home, no worries! We’re here to help with every step of the way with a proven and accountable online process that’s ready to make buying a home in Edmonton as easy as possible. Get in touch today and see how you can get started!
Originally published May 21, 2019, updated July 15, 2020