Income Suite or Not?

With the cost of owning property skyrocketing in cities like Toronto and Vancouver, more and more first time homebuyers are turning to income suites to help get them into the market. Shows like HGTV’s Income Property make it look easy enough to do. Before you take the plunge let’s have a reality check and look at some of the pros and cons.

 

 

 

 

 

 

Pros:

The Extra Money. Whether used to get into a place you otherwise couldn’t afford, reduce living expenses or to try and pay down the mortgage faster, the extra money is the obvious benefit to having an income suite.

Property Values. An income suite can add to the value of the property. Adding an income suite provides the highest ROI of any home renovation project.

Cons:

Lack of privacy. You will be sharing space with a tenant whom you may or may not feel comfortable around. 
 
Landlord responsibilities. Being a landlord means being ‘on call’ to fix problems the tenants are having with the property. Living in the same house with your tenant means being on call 24/7.

Residential Tenancies Act. Even though you’ve spelled out the lease terms, including rules, notices and penalties for non-payment, it can be very difficult to remove a difficult tenant and/or get paid for rent in arrears. Be sure to do a thorough background check before renting to anyone you don’t know! I don’t want to read about your nightmare tenant in the newspaper!

Hidden costs. Besides the cost of upkeep of the income unit there may be other expenses as well. Insurance premiums could increase, however it’s best to inform your insurance company as they might deny a claim if they discover an income suite they didn’t know about. Rental income is taxable income that must be reported on income tax returns and could increase what you owe. Lastly, an income suite is considered an investment and could be subject to capital gains tax when you sell. 

Before you make the decision to buy a property with an income suite, be sure to consider the pros and cons and ask yourself if the benefits are worth it to you.