In our last blog, we looked at using your savings to purchase a second home or property like a cottage or recreational home. This time around, we’re going to delve into building a second unit on your existing property and how to make that happen!
When we say building a “second unit” on your property, this can include a basement suite, a legal separate unit, or even a coach house. Your kids, parents, or anyone else can move in and, as the trend takes off (which it will), this extra space will bring more value to your overall home price.
Be aware though, not all secondary units are the same. The revenues from something like a nanny suite cannot be used for mortgage qualification. It will help you with your day-to-day budget but banks won’t typically recognize that as income. If, however, you have income from a separate legal unit (like a duplex), this can be used towards your mortgage qualification.
Coach houses, even for the cost, do not offer any additional value to the property yet. Similar to the nanny suite situation though, coach houses can offer excellent income to supplement your mortgage payment (you just can’t use it to qualify). It is a common myth that outbuildings like barns, sheds, and coach houses add significant value to a property. The majority of lenders and default insurers actually only ever consider the main house plus 5-10 acres of land when evaluating a property.
A common investment question we’ll often hear is when someone has retired parents who are trying to downsize. They might want to purchase but are having a difficult time finding the right sized property and at an affordable price in Ottawa. This is a perfect case scenario for building a coach house on your property!
You essentially build a tiny home on your property (subject to city rules and regulations) where your parents can live at a significantly cheaper monthly cost for them. This type of setup also gives you and them your own space and privacy while adding to your property value. As you can see, this is a preferred situation to having them buy an expensive condo or move into a retirement community. So let’s crunch some numbers and see how much it would cost to build!
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