Smaller versus bigger house with a suite?

About a week ago I was contacted by one of our blog readers, Melissa, who suggested a blog post about which is preferable: [1] a smaller/less expensive house, or [2] a larger/more expensive home with “mortgage helper” suite. Of course, houses with a ready-to-rent suite command a higher price than those that have no suite. As Melissa says: “it seems increasingly difficult to find a house with a suite (or good potential for one) under 600K” …

What are your thoughts?

P.S. If any readers have more discussion topic ideas – let me know! 🙂

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93 thoughts on “Smaller versus bigger house with a suite?

  1. Vancouverites and Torontonians may have finally clued in to how affordable we are – much better life for half the price.

  2. Since 1990 we’ve only had a 900+ sale May and June twice, 2007 and this year.

    Thu Jul 3, 2015 8:05am:

    Jun Jun
    2015 2014
    Net Unconditional Sales: 910 680
    New Listings: 1,346 1,234
    Active Listings: 4,003 4,695

    Please Note
    Left Column: stats for the entire month from this year
    Right Column: stats for the entire month from last year

  3. Government provided home care has also been drastically reduced for Vancouver Island over the last two years. The default max quietly went from 120 to 60h/month. Private homecare is out of reach for almost everyone. The rough cost for 1h of home care per week runs ~1800/year.

    How will that impact the housing market? Families are being pushed harder to provide care that they often are not in a position to be responsible for which results in more people staying out of the workforce, expenditures on renovation to add or redo suites and then injuries due to inadequate training to be a primary caregiver.

  4. Population growth in Victoria is much lower than many other parts of Canada. In 1990, the Victoria (CMA) population was 290,006. Twenty-five years later, it is now 361,607. Those 71,601 extra people works out to about 25% more people over 25 years … that’s just a 1% increase per year.

  5. In the past 50 years, the life expectancy for Canadians has increased by 10 years. In 1965, you would retire at 65 and expect to live for an average of 7 years. Now you could expect to live for an average of 17 years. That “extra” ten years is not cheap, particularly when long-lived seniors are often needing in-home or institutional nursing care.

    My father died at 82. In his last year of life, he was bed-ridden at home and spent close to $70,000 out of his own pocket paying for medical equipment and in-home care. With his complex health issues, a care facility would have cost $13,000/month – so staying at home was the cheaper option (as well as his personal preference). He had planned his finances well and has always stated that he wanted to ensure that he never would be a financial burden to his children. He was true to his word.

  6. @Introvert

    I would prefer not to take a heavy-handed approach, requiring comments to be screened and/or edited before they are posted. If conversations remain respectful, then I won’t have to do this.

    I believe that the lively discussion and lack of personal attacks is what sets HHV apart from many other blogs.

  7. I will give you this.It has some mild interest because the bankruptcy rate from 2010 is down overall but seniors over 65 is flatish per capita. So they are worse off than everyone else… but not such an alarming headline if simply stating what is… “TOTAL BANKRUPTCIES DOWN BUT SENIORS STAYS FLAT”
    Total Bankruptcies
    2010: 96,766
    2014: 67,955

  8. Wasn’t the plan as a senior is to retire debt and mortgage free and not claim bankruptcy ? At least that’s what the plan was for most people in all my adult years. What we are seeing is a new trend of dumb or unfortunate seniors due to cheap and easy credit the last 10 years.

  9. @Leo, As it turns out it is probably pretty close to 20%
    from 2010 to 2014 the population aged 65 and over in Canada grew by 15.9%…
    2010: 4819700
    2014: 5585300

    This factoid that those over 65 are showing a spike in bankruptcy is one statistic that should be population adjusted…. The actual fact is that it’s relatively flat per capita… I can sense when someone is trying to call a Halibut a Bear any day…. Halibuts don’t sell clicks though….

  10. I’ve seen lenders bouncing applications over vermilucte for example. Then you have the buried oil tank saga. Insurance where do I start? Everything from knob and tube to as recent as poly b plumbing can be big insurance issues.

  11. Marko thanks
    These were new homes on 10000 sq ft or smaller lots. Not estate size.
    Just by a function of price I think many buyers are priced out; but you think with record sales right now they would move faster.

  12. Just Jack, you’re right: each kid does learn at a different pace. And the pace at which you’re learning the difference between “there” and “their” is particularly remarkable, seeing as how you’re well into adulthood. Tip: please don’t proofread your kids’ essays; they will thank you.

    Second, several of you stated that a good/great education can be had at just about any public school, and I fully agree. Also, I would never send my kids to private school. In fact, I’m philosophically opposed to their existence.

  13. New builds is not the problem as older homes have become a insurnace/mortatgage challenge in the last five years. Price is the key…some of the homes you linked are pushing $3 million.

  14. You’re welcome Jack. Agreed, it is a real wake up call to those who weren’t aware or those who choose to put on the blinders. Vancouver and Toronto weren’t zooming up in price because they were the next London or Paris. It’s all great when it’s going up but when the money flow stops, there will be a price to pay.

    Victoria, in my opinion, just got caught up in the Vancouver irrational exuberance but on a lower scale. Will be interesting to see when the Canadian media picks up on this major shift. As Numbers Hack posted, those are a lot of custom homes not selling, and all in prime locations built on very expensive lots.

  15. They shouldn’t sell those condos in Spain. The government should pay companies to demolish them. Thereby stimulating the economy with jobs and reducing the supply which would stabilize house prices. Ironically you should pay the companies that built them to tear them down now.

  16. Using a straw buyer is not considered fraud when it’s an all cash transaction. Simply because no one is being deceived.

    A straw buyer can’t get a mortgage because then they would be committing fraud by deceiving the lender.

    However cash transactions place doubt on whether these sales are at fair market value. Since a straw buyer is not acting in their own best interests in acquiring the property.

    Yet the all cash deal is reported as a sale and these questionable sales are used by automated valuation models such as EMILI by CMHC or other risk management tools by lenders to set re-financing values. And then you get home owners refinancing their properties at inflated prices. The all cash deals also may be used to influence decisions by prospective buyers. Would you be likely to buy in a complex that was 80 percent sold in 3 days at full or above asking prices?

    A human appraiser will typically catch these inflated values as there is a set of guidelines that the appraiser should be following. And the sales just don’t make sense with the rest of the marketplace. They stick out like a sore thumb.

    But our mortgage system is becoming more automated, with lending institutions expecting that 95% of all refinancing will be done by these automated valuation models in the near future.

    Everything goes along fine as long as prices keep rising. When the market stalls then these over financed properties become hideous beasts to deal with by the lenders and high ratio insurance providers. You can’t bankrupt a Crown Corporation like CMHC but maybe the little guy like Canada Guaranty could go under or Genworth Financial would stop providing insurance in Canada. The Office of the Superintendent of Financial Institutions OSFI realizes the limitations of AVMs and would like the banks to back off on using them as a primary source of loans. But AVM’s are fast and cheap. And if a loans officer or a broker can close a deal before the applicant can get out of the seat in front of the them, the less likely that applicant is going to cross the street to the competition.

    “Would you like fries with your mortgage?”

  17. Growing populations need houses to live in. Who would have ever guessed??

    2014 Net Migration Rates
    Australia 5.74
    Canada 5.66
    United States 2.45
    Germany 1.06
    Japan 0.00

    Hence why Japan has seen the lowest house price growth, while Australia has seen the highest.

  18. nan – totally agreed on all points. My comments about “not mixing with the lower classes” were ironic (Though sadly representative of an actual viewpoint that is usually expressed more subtly but in the end amounts to don’t send my kids to school with the poor inner city kids)

  19. Yes joking! But unfortunately it has a kernel of truth as many parents don’t like to send their kids to schools that have a high proportion of kids from lower socioeconomic strata. The rich like to flock together and one way they do that is by sending their kids to expensive private schools.

    I am personally a supporter of a strong public education system as it one concrete way that society can try to offer equal opportunity to everybody. I would only contemplate private school for my own kids if something was going SERIOUSLY badly with their public education and I had tried several different schools. For most families the money spent on private education would best be spent on post secondary education for the kids, fun and interesting travel experiences as a family and securing the parents own retirement so that you don’t end up burdening your kids

  20. Thanks Hawk for the link to the Australian article. A really good read for those that want to understand the flight of foreign capital into real estate. It helps to explain people’s observations of what’s happening in places like Vancouver and Toronto. Straw buyers residing in Canada being paid 2% of the home price to buy properties for relatives and friends living in other countries. Cash transactions that can’t be followed or want to be followed by our Provincial and Federal governments.

    The positive side to all this “money laundering” is that it kept countries like Canada and Australia out of a prolonged recession similar to what happened in the USA. The negative side is that it has only deferred the recession and caused the market to bloat, in some cities, to an astonishing level. The much needed correction in those bloated cities, I would expect to be considerable.

    Just like a cigarette is a delivery system for Nicotine. The real estate market and specifically new condo construction is the means to deliver cash into Canada. Developers are not building homes to live in – they are providing a conduit to move capital. In that case the condos can remain empty as there is no economic incentive to have the condos occupied.

  21. Chinese money fleeing Canada. Scary how fast things can change. So much for the Asian explosion in Victoria theory.

    “We have been tracking this for two years,” says Tee. Those outflows from China are compounded by the flight of capital out of Canada which is now “bursting” to find a home in Australia.”

    “Due to the bubble in Canadian house prices and ensuing concerns over social dislocation, Canada’s government shut down its investor visa program last year. Some 40,000 Chinese visa applicants with a minimum loan to governments of $C800,000 were handed back their capital.”

    “That’s roughly $32 billion,” says Tee. “The Canadian government said: ‘We don’t want your money anymore’ and that capital is now hitting the Sydney market.”

    “There is a mountain of liquidity. China is bursting with flight capital. They can’t go to the US, they can’t get it into Singapore anymore, or Hong Kong.”

    http://www.smh.com.au/business/comment-and-analysis/wall-of-chinese-capital-buying-up-australian-properties-20150628-ghztdf.html

  22. Highest ranked PUBLIC schools in Victoria from Fraser Institute:
    1/ Willows for Elementary
    2/ Oak Bay for High School

  23. Bankruptcy is only part of the problem
    “According to Statistics Canada’s most recent numbers, in 2012, 42.5 per cent of people aged 65 and over still had debt.”

    Yes, nearly 5/10 seniors have NOT paid off their debt (e.g. mortgages HELOCs) by the time they are 65. Some of them end up going bankrupt, but what type of retirement are you really “enjoying” when you are worried about making another monthly payment?

    This is not really a demographics issue, it means they are buying something very expensive (e.g. that they might not necessarily can afford). What a world we live in today, sorry I can’t afford an vacation now that I have the time because I am still making mortgage payments!##$?

  24. Cherry picking ? Call it what you want but It’s still a fact. I saw a headline that it’s 30% seniors in Ontario. It’s been predicted for the last five years or more that seniors are doing stupid things with real estate, investments, HELOC’s etc and putting themselves in bad spots. This is going to become more common place just like seniors who can’t afford to pay land taxes etc. It’s called easy credit, or shall we say “too” easy.

  25. Agreed. Paying for secondary education – with some contributions by the kids – and a down payment on a house later on is what we choose too. I view this as providing way more of a leg up than going to a private school in most cases.

  26. Looks like the seniors have rolled the dice more than we think. All these panic buyers paying over ask will eventually find out the hard way. Cash is king, debt sucks.

    Seniors Going Bankrupt In Soaring Numbers

    “According to the federal Office of the Superintendent of Bankruptcy, 10 per cent of those who declared bankruptcy in 2014 were aged 65 and older. That’s a whopping 20.5 per cent increase from 2010.”

    http://www.huffingtonpost.ca/2015/06/29/seniors-going-bankrupt-in_n_7685576.html?ir=Canada%20Business

  27. It looks like we are well on our way for the highest amount of sales since 2009 (956), while new listings are the lowest since 2010 (1119) and active listings are lowest since 2009 (3509).

  28. The other benefit of private school is that you graduate with a network of high socioeconomic status friends who can give you jobs and contacts later if you don’t achieve much success on your own.

    I think that it’s highly doubtful that you are going to stay with the same group of kids from a private school elementary class all the way though college or university. I would argue that the network of friends you gain during post-secondary education would be the only people who may have an influence of your career.

    Versus public school where your kids may waste their time making friends with the “lower classes”.

    I can only hope that you are joking with this statement.

  29. I’ve attended both public and private schools. I know more schmucks from public school simply because I met more people in public schools because there are more of them.

    As a percentage though, I would say that more of my private school acquaintances are underperforming than those I know from public school. I think there is as much to be said for tempering your children in the fires of a diverse social environment as there is for avoiding a environment full of perceived entitlement. Being sheltered from the real world doesn’t really do anyone any favors.

    Diverse social interaction with folks from public school and participation in proper competitive sports where winners were winners and losers were losers taught me more about how the world works than anything I learned in private school. The classes were smaller and the discipline was higher but the content was more or less the same from a technical perspective.

    I valued both experiences for different reasons but ultimately now as a parent, I would prefer to send my kids into the world with a solid public education and parents who can afford $430,000 more post secondary education in todays dollars @ by 18 (the net future value of $20,000/ year for the 13 years @ a 7% real stock market opportunity cost it would cost to send 1 child to private school here in Victoria).

    Maybe I can afford private school, maybe I can’t but either way, private school probably won’t make a difference in my children’s future. However, should I come into the excess cash, being able to afford to send my kids to the post secondary institution of their choice without incurring any debt and having enough left over to put 25% down on their first house will confer substantial advantages to them throughout their lives.

    I really don’t care what my kids look like on Facebook as long as their smiling – but that’s just me.

  30. I know of a recent case of a young couple who were considering buying a SFH close to downtown Victoria so that they could both be close to work. However, after the woman was expecting her first child, they changed their housing plans and ended off buying a house a few blocks away from Campus View in Gordon Head. The plan is that in 5 yeas, when their first-born is old enough to attend kindergarten – they will be just a few blocks away from their preferred elementary school.

    I find it amazing that people make choices like this so that their kids can get into a certain elementary school, but don’t consider making similar choices to reduce commute times (and costs) for either themselves or their spouses.

  31. Exactly. We were talking about real estate and thus the perception of schools and their effect on house prices. The reality is the individual and their home life has a much bigger influence than any school ever will.

  32. I agree with Marko. A lot of the difference between schools is the demographics of the kids that go there. As long as the parents are supportive of the kids education, kids can get a good education at any public school in BC.

    But having said that I know that parents obsess about schools. Hell I see parents getting stressed out over choice of preschools. Really!

    The benefit of private school is not necessarily excellence in education but rather “failure-proofing your kids”. The better private schools are extremely invested in making sure everyone learns at least something, while in public school with limited resources some kids do get left behind. The ones that get left behind are the ones with a combination of poor parental support and low academic ability. The other benefit of private school is that you graduate with a network of high socioeconomic status friends who can give you jobs and contacts later if you don’t achieve much success on your own. Versus public school where your kids may waste their time making friends with the “lower classes”.

  33. I notice a lot of sales in Fairfield are going over list –

    352539-434 Arnold Ave-List 529, sold 542
    352255-1005 Oliphant Ave-List 699, sold 757
    351786-942 Wilmer St-List 719, sold 725
    351215-437 Arnold Ave-List 630, sold 671

  34. It seems the definitive answer is whether the school is public or independent. Oak Bay ranks the highest in public but it doesn’t meets the lowest in comparison to independent schools ranked in the most recent five years.

    If you want the “best” education for your children, then you’ll have to move to the mainland for public schools or send them to an independent school in Victoria.

    Are you willing to sell your home and move to better ranked school on the mainland? I think most people would say -no. A reasonable person accepts that there neighborhood public school is good enough for their children. A couple of percentages here or there isn’t going to make them change schools.

    What matters to the parents is whether their children have friends and enjoy their studies. How well they do scholastically depends on the support they receive from their parents and interests outside of school.

    Some kids are late bloomers when it comes to learning. They aren’t smarter or dumber than the next kid they just learn at a different pace. After 12 years or more in any school most seem to function at a level to survive in this world.

    https://youtu.be/gG5U7MVGYoI

  35. Monday, June 29, 2015 8:00am

    MTD June
    2015 2014
    Net Unconditional Sales: 835 680
    New Listings: 1,266 1,234
    Active Listings: 4,013 4,695

    Please Note
    Left Column: stats so far this month
    Right Column: stats for the entire month from last year

  36. I think it’s a bit of both. Spectrum had a great arts program which was the drive to move me there. They had a full on studio space for me 🙂 they had a TV editing studio as well as a n amazing music program. This was not at Belmont… The kids at that go to a school are also a big part of the equation. Belmont has an RCMP officer stationed at the school for instance. Do they have that at any schools in the Victoria region? Anyway, It is what it is. All it takes is perception to sway a market. Thus the move up market wants Gordon Head not Langford…. Especially because your suite will be way more rentable there…..

  37. Is there really any difference in the education delivered between the public high schools? I would think the only difference is the socioeconomic status of the kids going there.

  38. I’ll give Langford credit for making an effort to build an urban downtown. I can’t say the same for Saanich, which totally rides Victoria’s & Oak Bay’s coattails in that respect. My wife and I were chatting recently about this – though we live in Saanich, almost all of our going out (restaurants, coffee shops, pubs, art events, etc.) is in Victoria or Oak Bay. The strip malls on Shelbourne are pretty hard to get excited about.

  39. Higher income families have the financial means (and therefore time) to be more involved in their children’s education. They also demand/expect more from the school. When I was a kid, Mount Doug and Oak Bay were considered the best choices for “academic” high schools. Not to surprisingly, these schools are located in more affluent neighborhoods.

  40. Yes, Spectrum is perceived to be a better school than Belmont; and Mount Doug High School (in Gordon Head) is perceived to be better than Spectrum…

    For better or worse, the more academic schools are almost always those with students whose parents have relatively higher incomes. And those with relatively higher incomes tend to live in relatively more expensive neighbourhoods such as those found in Saanich East, for example.

  41. Heck I grew up in Langford and my parents helped me get into Spectrum instead of Belmont… Although we did live in the highlands zone of Langford…

  42. Plus…. Once the kids get older school gets on the radar. Belmont is ranked near the bottom….

  43. Langford is fine. But it is simply a suburb and has suburban bones. The young ones want to walk to breakfast joints and boutique coffee shops. They want to ride their bikes to work. They want to take a cheap taxi ride home at night. Or at least they idea of these things. They want to live an urban lifestyle. The ultimate is that with a detached house. This the high demand. So simple…. Maybe once the kids come and or get older then still, it’s Gorden Head that’s next in line not Langford… Oh, and I would hardly call the particle board panel home subdivisions better built…

  44. Hawk,

    I have read through many posts on the old blog. Because of the way it was set-up, searching of specific info is nigh impossible, requiring sifting through 300plus comments per bi-weekly post.

    Thank you so much for your summary. I take it that only masochists and those of us who didn’t have the foresight get into the market while still in grade school should go for a house with a suite. I think I’m 2/2.

  45. “I don’t enjoy long, frustrating commutes”
    -Agreed! I think this is a big one. More jobs in the West shore, more telecommuting and home-based businesses have probably eliminated commutes for many people in recent years.

    “six feet is all that separates you from your next-door neighbour”
    – most housing isn’t like that out there. But then again you could still end up in that situation in town if you’ve got people living in your basement.

    “I do appreciate parks and green spaces–real ones, not the token, minuscule ones”
    – check out Goldstream Park or the Esquimalt Lagoon (though I think that is technically in Colwood). Seriously. They’re both awesome.

  46. And that’s why I was curious to hear from people who actually live there.

    I’ve already read several years of opinion commentary from people in Victoria and Saanich about how awful they imagine Langford to be.

    I think most of the anti-Langford stereotypes are hilariously outdated.

  47. No, my negative attitude towards Langford is based on today. I don’t particularly like shopping; I don’t enjoy long, frustrating commutes; and I don’t think newer homes are necessarily built better than older homes (it’s often the opposite); I don’t covet communities where in some parts the houses are so sardined that six feet is all that separates you from your next-door neighbour; and I do appreciate parks and green spaces–real ones, not the token, minuscule ones that so often developers have begrudgingly thrown in helter-skelter.

    Langford attracts more new residents each year than Victoria and Saanich combined primarily because the latter municipalities are no longer interested in unbridled population growth (if they ever were). Langford also attracts more newcomers because its houses are less expensive. Why are they less expensive? Because there are perceived and real downsides to living in Langford as compared to living in Saanich or Victoria. Or perhaps it’s because there are more upsides to living in the latter as compared to living in Langford.

    Certainly many people love Langford and will tell you that it is their preferred location. Most of these people are undoubtedly telling the truth, especially if they value sharing a community with many other young families and if close proximity to shopping is extremely important.

  48. Or is that simply how some people justify living in sub standard housing in Victoria? The difference in quality of housing for the same price is staggering between the two areas. Some people have to justify why they’re living in the City somehow. Even if that means stereotyping people and neighborhoods.

    I stopped into a Barber shop in Langford and spoke with one of the barbers who had at one time owned a home in Victoria. Now he works and lives in Langford and has never been happier. The best decision he ever made was to leave the city. He walks to work in under 5 minutes, goes home for lunch and meets his wife after work for a drink and a movie.

  49. I lived in Langford in the 90s when I was a kid and didn’t like it. No jobs or shopping, you had to go into town to work and shop. Heck, no sidewalks or street lights for that matter. And just a general sense that the town sucked and would never change. Was I ever wrong! And the guy who proved me wrong was the owner of the local garbage company of all people.

    Rarely challenged and never defeated, Stew Young is the most popular mayor you could imagine. So residents are clearly happy with the situation out there.

    Probably half the homes are less than 20 years old, jobs everywhere and so much shopping that Langford is the weekend shopping destination for people who live in town. How times have changed!

    It would be interesting to hear from people who actually live in Langford why they like it there. There’s obviously a reason why these days it attracts more new residents each year than Victoria and Saanich combined. That never used to be the case.

    It seems as though the negative attitudes are left over from 30 years ago and don’t reflect what it’s like to live there in the year 2015.

  50. You forgot to put the record low interest rates in there Michael, right at the top of the chart as they are about to turn the other direction over the next year as most professionals are predicting. If that was a stock chart it’s reading overbought and about to explode like the Chinese stock market. Better load up on your Chinese stocks Michael.

    Sounds like BC real estate:

    “In other words, exuberance for Chinese stocks isn’t being backed up by fundamentals. Instead, it appears the market is being carried higher by various forms of government stimulus and investor frenzy.”

    http://money.cnn.com/2015/06/19/investing/china-stocks-shanghai-correction/

    Jack,
    The China stock market is valued at $10 Trillion. You think any Chinese money isn’t all leveraged ? Margin makes the world go around no matter what country it is, just like the US stock market. When the margin calls come, then the shit hits the fan and it will be felt worse than in 2008.

  51. With google no-one who can type need be “unprepared”. I don’t believe that younger investors are buying up the condos downtown. Most younger investors don’t have the down payment or credit for multiple condos.

    I do believe housing prices are much less affordable than they were for our parents and grandparents. That is why SFH have suites more frequently and younger people buy condos to start.

    I don’t remember anyone in my parents or grandparents generation having a suite.

  52. Are Canadians becoming a nation of landlords as high real estate prices force house-hunters into buying and renting all or part of their properties rather than becoming just an owner occupier?

    And are property investors younger than before and more likely to own several rental properties? Since the bulk of these investments don’t require property managers and are more of an insurance policy for emergencies with an occasional property check by the landlord. The novice investor is simply following the herd of similar investors hoping a crisis doesn’t happen and when it does they are unprepared. A possible reason why novice investors’ purchases center around the downtown core and tend to be new or near new condos requiring minimal maintenance. Instead of looking for investments, outside of the core or requiring additional capital, that may make more economic sense.

    Could this be the reason why close to 50 percent of all sales activity happens within a 10 kilometer radius of Victoria City Hall?

    Young novice investors that have never experienced a downturn in the market or a prolonged recession; and may not prepared for when the next one comes along.

  53. There doesn’t seem to be much of a correlation over the past 25 years between our real estate and China markets.

  54. Thanks for the comment totoro.

    Becoming a landlord has never been a dream of mine 😉 However, over the medium term (5-10 years), I’m pretty certain I could put up with the headaches to come out further ahead financially. I missed out on getting a job with a pension plan, and as much as I hate to admit it, I will be counting on the sale of property(ies) in 20 years time to partially fund my retirement.

    I suppose the advantage of having lived in a condo for years is that sharing a house with only 1 or 2 people should seem quite private in comparison!

  55. Yikes, I’m noticing the odd old dog of an apartment going up to 40,000 over list. Maybe things are overheating… Even a brand new twelve hundred foot apt went 19000 over list near cook st village.

  56. Margin calls in the Chinese stock market is a wild card. How will de-leveraging in the Chinese stock market spill over to funding real estate construction and purchases worldwide?

  57. Not that I think there’s much relationship between Chinese stocks and BC real estate, but it looks like those Chinese millionaires have doubled their money over the past year.
    ?url=/china/stock-market

    If Morgan says don’t buy the dip, it’s time to buy the dip 😉

  58. Thanks for the numbers JustJack; puts things into perspective and helps explain my slight confusion/dismay about why there are so few options available currently. I’m sure that far more than 10% of people looking to buy are all eyeballing similar properties.

  59. Wasn’t this subject beaten to death many times over on the previous blog ? Bottom line is if you want a stranger in your basement, risk having a nutbar you can’t get rid of for months, lose space for your family if you have kids and go insane, and are hard up to own a home at any cost, then go for the suite.

  60. Yes, you can do it for this price if you find the right place and you can do it with permits using professionals. You don’t need professionals to buy second-hand fridges, ovens, tubs, ect or look for bargains on tile and flooring and there is no reason not to do this. You also don’t need professionals to clear away debris. Home insurers never ask if you did work yourself btw.

    We used professional electricians and plumbers – all was done to code. I don’t think you actually have experience with this. Also, different municipalities work differently.

    Our legal secondary suite was largely pre-existing and all we had to do was upgrade the electrical with a permit for the second stove, add interconnected fire alarms, and a second layer of drywall on the ceiling which we planned to do anyway for sound-proofing.

    You are financially better off finding a place with a suite and if it needs some work to bring it to code and legalize it it will be much cheaper – provided you are in an area where this is permitted.

    If you are going to buy a place that needs to be dug down or lifted up that is a different story.

  61. Certainly there are options. You can buy a 1,100 square foot rancher on a slab foundation for $375,000. However at $625,000 your upgrading to home with a full height basement and double the square footage of the rancher.

    What I was trying to illustrate was the difference in value between a house with an unfinished basement and a house with a basement suite would only add up to somewhere between 30 to 40 times the gross monthly suite’s rent. That could be somewhere around $50,000 for the typical basement home.

    For example in Gordon Head where there are a lot of basement entry homes, some with and some without basement suites.

  62. If you want the suite built to code with permits then $30,000 won’t come close. Buying from the re-store and doing the work yourself may not be the best decision since you’re liable if the tenants get electrocuted and hotel costs if the suite floods. And then there is the issue of house insurance with handyman quality and second hand materials.

    You simply can’t have a professionally built suite without payments. Since a professional would never take on a job without getting permits. Doing so would make them unprofessional right from the start. If they skimp on permits – what are they trying to hide?

    A monthly rental factor of 35 is equivalent to 3 years or a 36 month pay back.

  63. We just had to ask ourselves this question.

    At the end of the day, with 20% down, for the same price we could buy a house at $325k with no suite or $625k with a suite — we chose the suite.

    We’ll see how being a landlord treats us but down the road we like that we have the ability to take the suite back for ourselves.

  64. Yes, don’t buy a character house that needs to be lifted. It is about $30,000 to add a suite to a home that already has appropriate space if you shop wisely. I use payback time as a rough measure. Will the rents over a three-year period pay for the suite?

    Best thing is to just buy a place with a suite already in place if you are not super handy. Putting a suite in is more work than you’d think and annoying in terms of dust, dirt, debris, tradespeople in your home and noise.

  65. The “you’re” wasn’t directed at you DavidL, you sound more than qualified. I see you reclaimed your suite. I did the same.

  66. When I bought my house, it included a rented suite. After about 8 months, I gave the tenant notice that a family member was going to be moving into the suite. The family member moved in (paying rent at about 50% the market rate) for about 10 years and then moved out when we need more space for our family.

    I was never keen on being a landlord. Since reclaiming the space in our basement (an additional 750 sq. ft.) my family has been a lot less crammed than we were when just living on the upper floor. It was fine when there were just two of us, but add a couple of young kids and I just needed more space to maintain my sanity!

    My advise to owners thinking of adding a suite is to make sure that removal of the suite (at a later time or by a subsequent owner) can be easily done. In my case, reclaiming the space was easily done by removing a 6 ft. wide wall.

  67. It’s difficult to determine how much a basement suite adds value over a fully finished basement. Typically it’s just the cost of adding a kitchen and some upgrades.

    If the home has an unfinished basement then the costs can be quite a bit higher. Especially for character style homes that may need the house to be raised or the lower level excavated. An unfinished low ceiling basement in a character home can have costs around a $100,000 +/- 20 percent to restructure the basement and add a basic two-bedroom suite. Plus the time that you’ll not be living in the home during the construction which you may figure at 1 day for every thousand dollars being spent. A $100,000 raise of a character home means you’ll be living at friends or renting a suite for 3 months.

    But is it really a worthwhile venture?

    Economically speaking, most of the time the answer is no. The cost to create the new living space in an existing character home is significantly greater than the increase in the property’s market value. I have to calculate the contributory value of suites and basically the value added may be calculated using a monthly rental factor. The rent multiplied by a factor determined from the market place. And that is typically running at around 30 to 40. Say 35 in this case. Then the contributory value of the suite would be its economic rent X’s 35.

    If the anticipated rent for the suite is $1,500 per month and the cost to restructure the home is $100,000 then you can see a minimal shortfall of $47,500. A shortfall that you’ll not recover in the marketplace and have to pay for with an increased mortgage.

    To some that seems to be acceptable for many personal reasons but on a cost benefit analysis – it isn’t. You do it because you love the neighborhood and have convinced yourself that you’ll never sell the home.

    However….

    Eventually – we ALL sell.

  68. If you pay an extra $80,000 for a house with a suite you are paying approx. $300 a month more for your mortgage and may need an extra $8,000 down. If you get $900 a month for the suite you are ahead $600 less the loc on the $8000 – which pays for an additional approx. $160,000 of mortgage..

    Long-term you’ll have an appreciating asset worth $80,000 more but will have benefited by having other people’s money pay for $240,000 of the home, less whatever taxable income there is which is not much in the first ten years..

    Financially it is a win provided you buy a solid home, but you don’t get a whole house to yourself. The financial gain would not be worth the impact on privacy to a lot of people. Plus being a landlord is not something everyone wants to take on.

  69. Sorry Michael, my attention was originally to agree with you then I started to write about homes with suites without leaving the “reply” section.

  70. Of the last 500 homes to sell in the core, 145 had suites. Roughly 1 in ever 3 or 4 homes that sell today have a suite.

    Sale prices ranged from a low of $425,000 for a 1950’s home along an arterial road in Saanich West. Imagine a home rented to university students and you have a good idea of what this one looks like. To a high of 2.5 million for a Equestrian estate on 59 acres in Cordova Bay. Half of the homes with a suite sold for less than $632,500.

    That’s quite the spread in prices. I would guess that most prospective purchasers looking to find a home to occupy themselves and have a mortgage helper are not looking for a home that was rented to students or a mansion.

    Since Melissa mentioned a home with a suite under $600,000 she has now limited herself to homes outside of Oak Bay and most of Saanich East and Victoria City.

    Assuming she wants to have her cake and eat it too. If I concentrate on Victoria City and Saanich East for homes with suites under $600,000 then Melissa’s limitation means that only one out of every ten homes listed for sale meets that criteria.

    Slim pickens indeed

    The obvious answer might be took look outside of these areas and find more selection. But that has to be weighed against lower rents and a higher vacancy or turn over rate of tenants.

  71. Oops, I didn’t see you made a new post…lol That comment was directed at the end of the last.
    I say smaller house/no suite… don’t be a landlord, you’re not qualified 😉

  72. Ok, we’ll say that interest rates somehow work different in the US… how about a Canadian study?

    “Over the past thirty years, increases in Canadian mortgage rates have not tended to trigger a decrease in houses prices. In fact, more often than not the reverse is true. Before I get into the numbers, let me start by citing my sources. I took the average five-year residential mortgage lending rate (from Statistics Canada) and compared it to the average selling price of a Canadian home (provided in a report by the Canadian Real Estate Association), on a month-by-month basis from January, 1980, up to June, 2010. I used the five-year fixed-mortgage rate because it is by far the most common term chosen by Canadians, and I went back to 1980 because that was as far back as the CREA stats went. The only tweak I made to the data was to compare interest rate changes to house prices two months hence, because I reasoned that higher rates would immediately impact offers to purchase, which take about two months to become transactions. Here is what I found:
    Over this period, totaling 365 months, there were 156 instances where the five-year residential mortgage rate increased over the prior month, and in 97 of these cases,
    house prices increased two months later. That means that 62% of the time, increasing mortgage rates corresponded with higher pricing.”

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