The most profitable kind of home renovation is building an income suite. If you are a house-poor homeowner, this is a way to create real value for your home and offset mortgage payments. How does an income suite renovation rate in the resale value of a house?
What should you look for if you want to buy a home that could be renovated to provide a suite to rent? An entrance that is separate for privacy and convenience, good ceiling height if it is in a basement and an extra parking spot which could justify charging a higher rent.
It is also a matter of supply and demand. Research the vacancy rate and find out what equivalent suites are being rented for. Some successful property owners feel the bottom line is if it is going to cost more than two years of rent, then it isn't worth it. If you need to spend $24,000 to do the work, then the rent needs to be $1000 a month. That means it will be two years before you will see a profit.
Here are some tips to consider in an income property:
- Your income space should meet your own standards. The more you fix up a place, the better tenants you will attract.
- Don't skimp on drywall, especially on the ceiling or adjoining walls. Not only does it add an extra layer of soundproofing between you and your housemates but it is also a fire barrier.
- Whether you get a home equity loan or a line of credit to finance the project, add 25 per cent over you professionally quoted budget. If you go over, at least you'll be ready for it; if not, nothing lost.
- Look for a property that is in an area where renters will want to live. Good choices could be near a university or college or dense employment area. Being near a major bus route could also prove to be a choice location.
A word to the wise: before you get started, make sure that rental suites are allowed in the area where you live.
