Effect on house value by installing legal, conforming basement suite

[cidley69]

Recently received city rezoning approval to add legal suite, wondering about finance options and how much reasonable to invest in suite.

House is 1000 sq ft bungalow in Marlborough, current value around 350k.

Any estimates how much value would change following suite development?

[ExtraSlow]

What's a reasonable monthly rent for top and bottom?
That's what's going to change the value. Is it an illegal suite now?

[s_havinga]

I would say basically nothing besides your monthly rent payments. Having a suite limits your potential buyers as not everyone wants to share their house. I did it for about 3 years and it go old. If you plan to stay in the house long enough, then eventually rent will pay for the reno, but don't count on getting much of that investment back when you go to sell. My thoughts at least.

[ExtraSlow]

Yeah, once that suite is in you'll be selling to people who want to rent it out. It's all about cash flow and expenses for those people. I don't know what a good factor is for these investors.

[cidley69]

It was originally an illegal suite when we bought the house. We bought it as starter house and needed the suite income to get into the market.

Top floor has rented for $1700 and bottom for $1100, but currently top is rented for $1350, and expecting bottom can get $800 once upgraded.

[Mitsu3000gt]

Aren't these properties really hard to sell after the fact? I don't know one person who would even look at a house with a full basement suite in it. Might be different if it's strictly a rental property though.

[mr2mike]

Ask yourself, why was it never done back when it was making $2800/mnth on a $350K house??

That's your answer.

- - - Updated - - -

This quote is hidden because you are ignoring this member. Show Quote

Aren't these properties really hard to sell after the fact? I don't know one person who would even look at a house with a full basement suite in it. Might be different if it's strictly a rental property though.

Some cheap mofo like myself! Haha.
But not in the NE.

[Xtrema]

Your rent situation isn't bad.

Don't know why you would legalize it in the first place. With increase taxes and same renting pool, you will never make the money back.

[ercchry]

Actual build cost will probably be more than added value if looking to sell right away, would only recommend if you are planning to continue to own.

If you want to be in the rental game it could make sense to do... and looking at buyers down the line, a place like that is going to be someone’s first home... and with the changing mortgage rules, people will be looking for any advantage they can get to be approved so I think you will have plenty of interest

As for financing.. depends on how much equity you have I guess... a refinance could be an option, but i’d get it done quick, as in the new year you might be having to qualify at over 5%

[cidley69]

One incentive for legalizing the suite: complaints from neighbors led to city inspector coming to visit, and made us remove the stove from suite. apparently stove is the official differentiator between being a suite or not.

Once legal no more risk suite will get shut-down, and its a revenue property need both floors rented.

I would have thought legally zoned and to code suite would increase house value.....guess not based on the feedback.

thanks

[Xtrema]

This quote is hidden because you are ignoring this member. Show Quote

I would have thought legally zoned and to code suite would increase house value.....guess not based on the feedback.

Yeah, you do have to go legit if you got snitches in your hood.

Double edge sword. You will exclude some buyers (not looking into renting or starting out) because of increased cost. But you will attract others (landlords and multi generation families).

I don't know Marlborough enough to comment but I would guess there are plenty multi generation type family in the area? Like once I have seen 6 Filipino adults living in a 600sqft apartment with 1 bathroom to keep cost low.

[KPHMPH]

Calgary makes its so hard to make a legal suite. Firewalls, separate HVAC, completely separate entrance...

That in my mind is to much work / money.

[JRSC00LUDE]

A good listing agent who knows comps and selling trends in your neighbourhood will have a better idea of this than us if you have a cost budget worked up.

[Xtrema]

This quote is hidden because you are ignoring this member. Show Quote

Calgary makes its so hard to make a legal suite. Firewalls, separate HVAC, completely separate entrance...

That in my mind is to much work / money.

It wasn't bad when the city was paying a portion of it.

As for OP, here's an example in Beddington (NW), for 1000 sqft property:

Legal suite: CoC Assessment: $427K

Illegal suite: Asking: $350K, CoC Assessment: $360K

EDIT:

CoC Assessment on similar legal suites in Marlborough:

$354K and $335K

And listing shows a similar property with basement built out asking for $313K. This sounds about right to me, NE property has always been 10-20% less than similar property in NW.


If you think you can get $350 for your house right now, the only ROI on any remediation to make it legal is from future rent. Sounds like to me you won't get increases in property value. Again talk to a pro in your area to confirm. Both legal suite registry and tax assessment data is publicly available if you want to do your own research. IMO it's not a bad investment if you are in it for the long haul 5+ years if you can keep to remediation cost below $20K (seem to be the value differential between legal vs illegal). At $800/mth, your ROI is around 30-36 months and it's strict profit after that.

BTW, for Oct 2017 in Marlborough, median/average price are $331K/$324K, ~3% less than last year, just for reference if it's worth throwing more $ at it.

[Gestalt]

We wont be legalizing our since on an old illegal suite (originally built at least 25 yearsa ago), our lawyer could not find a case where the city won in court. Throwing in a 2 bedroom windows and interconnected fire alarms cost us $3500, to met firecode.

[cidley69]

This quote is hidden because you are ignoring this member. Show Quote

It wasn't bad when the city was paying a portion of it.

As for OP, here's an example in Beddington (NW), for 1000 sqft property:

Legal suite: CoC Assessment: $427K

Illegal suite: Asking: $350K, CoC Assessment: $360K

EDIT:

CoC Assessment on similar legal suites in Marlborough:

$354K and $335K

And listing shows a similar property with basement built out asking for $313K. This sounds about right to me, NE property has always been 10-20% less than similar property in NW.


If you think you can get $350 for your house right now, the only ROI on any remediation to make it legal is from future rent. Sounds like to me you won't get increases in property value. Again talk to a pro in your area to confirm. Both legal suite registry and tax assessment data is publicly available if you want to do your own research. IMO it's not a bad investment if you are in it for the long haul 5+ years if you can keep to remediation cost below $20K (seem to be the value differential between legal vs illegal). At $800/mth, your ROI is around 30-36 months and it's strict profit after that.

BTW, for Oct 2017 in Marlborough, median/average price are $331K/$324K, ~3% less than last year, just for reference if it's worth throwing more $ at it.

Wow, that is great information, thanks for taking time to dig that up.

We are into the house for long haul, bought it during high market in 2007. We lived there for several years, and replaced furnace, roof, widows, etc, so the list of big ticket items that can need doing for next while is less. House is now part of the retirement income plan, lol.

[crazieness]

I have done a few of these and helped clients. The answer is it depends. REIN would say an instant $50-$60k. But it comes down to 2 core things:

A: Quality of workmanship - there are so many DIY people who use YouTube. Some do an exceptional job, others actually reduce the value of their home

B: Does the target buyer care... there are many illegal suites in the NE and in Marlborough... you're probably going to target an investor who is willing to pay a bit more if they know they are covered.

If you want to walkthrough a finished product let me know.... there are some essential things to be done but given how "new" this is, it isn't always consistent. Depends on the inspector who comes onsite.

Drop me a PM and I can walk you through what I know.