The trouble with thinking of your home as an investment is simply that you have to live somewhere. So if you decide to cash in on that investment you have to sell your home and either downsize considerably or move to a much less expensive market. Which could mean leaving the lower mainland altogether?
However, if you are fortunate enough to live in one of the pre-approved areas of the city you may be able to quite literally have your cake and eat it too.
Imagine you bought a home in Vancouver many years ago and you have been steadily watching your children grow up and your home climb in value. Your kids have now moved out and you have found yourself with entirely too much house, but no real interest in giving up the city lifestyle you have come to love.
This is where the City has really come through for some owners. Realizing that there is a serious shortage of available rental units, the opportunity for homeowners to build a second, cottage-type dwelling, facing a laneway has continued to increase since 2008 when City Council first started seriously adjusting the regulations. And with rental vacancy rates continuing to hang out below 1% the pressure has continued to build on politicians to create more options.
What this means is that you can, quite literally, increase the density of your property and have a rental unit right in your backyard. And if you’re thinking of purchasing a new property for your family, or as an investment, you may just want to make sure any place you select has this potential.
If as I suggested before you have too much house, with a laneway house, you could simply downsize to the opposite edge of your land and begin earning a considerable rental income on your original home. Of course, if you’re just fine staying in your place, there is no reason you couldn’t build and rent out the smaller laneway house. All of this is to say, that earning additional rental income has steadily been getting easier in our city.
Let’s go through some of the immediate questions concerning the construction of a Laneway house and decide if it’s right for you.
Am I zoned for it?
This is by far the easiest question. As the rental vacancy pressure in Vancouver intensifies, the City is becoming increasingly helpful to anyone who is helping them alleviate some of the pressure. The original regulations for laneway housing began officially in 2008 and since then they have been opening up considerably. And while it’s true that the City has created very specific regulations (many taking effect in 2013) this actually makes the process simpler for you and more standard for construction companies.
First and foremost, you must have a property with a laneway. I know this sounds pretty obvious, but no laneway, no laneway house. Next, you property must be wide enough and deep enough to accommodate the additional structure. Again the City has been very helpful in spelling this out. For starters, you can build a laneway house on, any laneway-lot, 32 feet or wider located in an RS single family zone. Use this City of Vancouver mapping tool to find out if you’re in the zone. Once you’ve done that you will want to have a flip through the Laneway How-to-Guide, also produced by the City of Vancouver, to get your mind around some of the construction hook-up fees and particulars.
Am I prepared to finance the construction?
This may be a situation where you want to consider taking out a portion of the equity you’ve built up in your home to make an investment. Knowing that you are going to be able to make a return through the rental income makes it one of the safest uses for a home equity line of credit, or a second mortgage.
One of the best ways to get a good idea of the rental market in your area is to talk to a property management company; and it’s never really too soon to begin these discussions. Even if you ultimately decide not to build a laneway house, you will at least have a sense of what you can expect with regard to rental income. This information alone can be beneficial if you eventually decide to sell your home, especially to someone looking to make an income-property investment.
I’ve never been a landlord isn’t that going to be a lot of work?
Being a landlord, on average, adds about 12 hours to your work week. Most of the time it’s not going to be extremely difficult but, for some people the extra maintenance and management of tenant issues falls outside of their comfort zone. There is also the concern of having the right tenant in place. With the rental vacancy numbers the way they are, it’s going to be relatively easy to get people to call, the bigger issue is with regard to screening and making sure you end up with a good tenant best suited to your property and your lifestyle. This is going to be especially important if you are living right across the yard. Having an initial conversation with a property management company, especially if you didn’t before you built the laneway house, may provide you some very helpful insights. You may ultimately decide, given the proximity, that you want to manage the tenant yourself. However, engaging a property management company for specific services, such as to help with screening potential tenants, assist with regular maintenance contracts, or provide you with local market rates and listing assistance may just be worth the conversation. The only thing worse than having a problem tenant is having one that’s right in your backyard!
Is it going to make my property taxes go up?
The short answer is yes. Adding a laneway house is going to add to the value of your overall property and thus, add to your property tax bill. However, you want to keep in mind the rental income you will be able to generate, not to mention the possibility for a considerably increased sale price when you do finally decide to sell your home. The one important thing to keep in mind is at no time are you able to split the property. The Laneway house and the primary residence comprise one property and must be sold together. That said, when you decide to sell, laneway houses do make your property very attractive to others looking for a rental income or families looking to keep grandma and grandpa close by.
So, is it right for you?
Ultimately, if your property qualifies, you will have to ask yourself if a laneway house is right for you. If you have been finding yourself thinking about venturing into the income property market this might be just the thing to help get you started while adding value to your home. Regardless of what you decide, be sure to consult a range of construction and property management experts during your considerations to be sure you’re doing what’s right for you.