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Recently, you may have heard of the new movement regarding Laneway units. For homeowners and investors, owning a property to rent is a great way to earn passive income. However, it can be difficult to decide whether to renovate your existing basement to rent or invest in other forms of housing units.
What are Basement Suites?
Basement suites are apartment units situated on the basement floor of multi-family or single-family property. The majority of basement suites are located below ground level. Oftentimes, landlords’ basement units must pass a series of requirements in order to be qualified to rent their spaces. Since the rental process is dictated by the landlord, the decision of who can become a tenant is a matter of personal observations. Additionally, the landlord would be on-site, since most likely they would be living above ground.
What are Laneway Suites?
The most well-known backyard units are Laneway Suites. Simply put, they are independent residential units situated on the same property as a detached house, semi-detached house, townhouse, or other low-rise residential buildings. A Laneway Suite is usually built in the back of the yard next to a public and accessible laneway and is often a smaller scale unit that is entirely separate from the main house.
How are Laneway Suites more Beneficial than Basement Suites?
When it comes to having a property to rent, basement suites are an option that many would consider, however, there are many stages that must be tackled to be eligible. In order to create a fully furnished space, the cost of construction could be anywhere from $30,000 to $70,000. Many factors go into financing a liveable space, such as: installing new walls and flooring, insulation, paint, plumbing, electrical features, inspection, and labour costs. In the growing real-estate economy, the added value from finished basements can only be estimated and there is no guarantee that it will be desired in the market. Furthermore, there are various elements that must be considered that are outside the realm of finance. You must ask yourself these questions: are you comfortable having a stranger live in your basement? Are you willing to sacrifice a level of privacy? Can you endure a higher level of noise? Additionally, basements are much more prone to flooding or dealing with bugs to the space being generally cooler and darker. Oftentimes, basement suites are seen as a housing option that costs less in rent, meaning the amount of rental cash flow, after your mortgage and other monthly costs, is much less.
In comparison to basement suites, Laneway suites offer financial benefits for homeowners so they don't need to sell their property in order to get more value from investment. The laneway suites should be seen as investments, while they may cost a bit more during its construction stage (averaging at $200,000 to $300,000), you are adding more liveable surface area to your property. Homeowners are also able to defer payment of development charges as per the City of Toronto. This method of housing not only provides privacy, but also offers a quality lifestyle for tenants that allows them to have access to direct outdoor space, spacious rooms, and a great amount of natural sunlight. In summary, putting a Laneway suite on your property can increase the property value due to its income-generating potential at a greater scale.