According to the Broadbent Institute, just 15-20 per cent of the Canadian middle class retiring without an employer pension has saved enough to retire comfortably. Nearly 47 per cent of Canadians don’t receive employer pension while Calgary millennials admit that they aren’t really focusing on building a retirement fund – for now at least.
Common wisdom dictates that you need to save enough to maintain your standard of living in retirement. However – life expectancy and how much income you have after inflation and tax – and other variables should also be considered to assess the lifestyle you can potentially enjoy in your retirement years.
Among the multiple retirement strategies you can leverage, a secondary suite is one of the most compelling, particularly if you’re aiming for a steady source of rental income.
Secondary suites are an important form of rental housing in rural areas and small towns that lack conventional residential rentals. Policy makers have identified secondary suites as a cost-effective means of providing affordable rental housing. Though the total cost of constructing a secondary suite depends on the architecture of your current home as well as your personal design preferences, it is usually a less expensive proposition than purchasing a new property or building one from the ground-up.
Your home may already have a number of the standard Calgary building code requirements and recommendations required to develop the suite. Construction requirements may be higher in new homes, but the changes are often easier owing to the benefits of new design.
Typically, homeowners take out a loan to build a secondary suite. If you think this may be a financial burden, think again:
- Though a secondary suite functions as a self-contained unit, virtually like a home within a home, it is not considered a second house. That means you don’t have to come up with a 20% downpayment.
- In most cases the rent from a secondary suite exceeds the monthly loan payments.
- The Canadian Mortgage and Housing Corporation (CMHC) allows 100% of rental income from legal secondary suites to be used at the time of qualifying for a mortgage.
- The monthly carrying costs associated with a secondary suite lowers the overall cost of home ownership.
You have the option to rent out your home at a higher cost if you believe your basement suite will ensure adequately comfortable living. Shared facilities such as a yard, laundry, storage space, parking area or even a hallway will continue making you feel connected to your living space. This option is popular among homeowners who find it more convenient to live and/or work out of a downsized space.
The Residential Tenancies Act describes the rights and responsibilities of Calgary landlords and renters. As a landlord, you have the right to collect rent on time, not to be harassed or disturbed by your tenant while allowing him/her the right to reasonable enjoyment, and to not have your house damaged.
Sharing your home with a tenant may feel uncomfortable or difficult, but it doesn’t have to be. In fact, as you can expect to interact frequently with your tenant, you have the opportunity develop a landlord-tenant relationship based on trust and co-operation. It will be difficult for tenants to adopt an ‘out of sight, out of mind’ mindset, compelling them to make good on their obligations and expected behaviors.
Under public health laws, landlords in Calgary have the responsibility to ensure that their properties are safe and sanitary for habitation. Besides ensuring that the indoor living space is safe and meets minimum housing, building, health and fire standards, as well as maintaining the structure of the buildings, landlords must keep common areas shared with other tenants, such as stairs, hallways and parking lots, clean. Taking care of rodent and insect infestation is also the landlord’s job.
As the landlord of a Calgary secondary suite, you can only focus on maintaining the interior and exterior of a single property. There is no extra management or related costs of shared spaces, including the backyard, to worry about.
The mathematics of a secondary suite works out well for anyone seeking the highest levels of financial security during their retirement years. Give it a thought and contact us for a secondary suite development assessment. We look forward to assisting you.
All in all, secondary suites are one of the best ways to break into the rental market. Avoiding hefty down payments or the hassle of maintaining a completely separate property. It would seem they are the perfect fit for the smart homeowner that is planning for retirement through real estate rental income.
What are your thoughts?