Harpreet’s perspective
Real questions. Real properties. Real numbers.
Look downstairs. Christmas decorations. Old furniture. A treadmill currently employed as a clothing rack. Now imagine a properly planned legal secondary suite.
For some Calgary homeowners and investors, creating a legal basement suite can potentially improve the usefulness of the property and generate rental income. But before buying cabinets, let's talk about the project and the financing.
First: Can the Property Actually Support the Plan?
Not every basement automatically becomes a legal suite because we installed a kitchen. Applicable City of Calgary requirements, building codes, permits and approvals need to be considered.
Depending on the property and project, things such as entrances, windows, ceiling height, fire separation, heating, electrical, plumbing and other requirements can matter. Use the appropriate municipal and construction professionals to verify the project. I understand construction, but I'm still not issuing you a building permit from my mortgage desk.
Now Show Me the Budget
Kitchen. Bathroom. Bedrooms. Flooring. Electrical. Plumbing. HVAC. Permits. Labour. Finishes. And my favourite construction expense: ‘While we have the wall open…’ Build a realistic budget with room for surprises.
Then compare that cost with what you're trying to accomplish. If the suite costs $90,000, what could it realistically rent for? How long are you keeping the property? Could the suite improve cash flow? Could it potentially affect the property's value or marketability? Now we're having a useful conversation.
How Are We Financing It?
Depending on whether you're buying or already own the property, your qualification and the nature of the project, different financing approaches may potentially be available. The important thing is to have this conversation before you've financed half the renovation on credit cards.
If you're buying a property specifically because you intend to add a suite, tell me before we structure the mortgage. The purchase and renovation financing should be looked at together where possible.
The Suite Isn't Just a Renovation
If your goal is rental income, treat it like an investment. What's the construction cost? What's the expected rent? What's the financing cost? What's the maintenance? What's the payback? And what happens if construction costs more than expected?
Don't build a $120,000 basement because somebody said: ‘Suites are good.’ Build it because the property, construction plan and numbers make sense together. Your basement doesn't need to remain where old furniture goes to retire. But if we're giving it a new job, let's make sure the job pays.