Basement apartments, also known as legal secondary suites or legal second units, are possibly the best real estate investments in Ottawa right now.
Everywhere you turn, people around us are looking to real estate as an investment to park their money and watch it grow. With many options to choose from, it can be difficult to decide which is the best investment for your situation. Do you buy a townhome and rent it out? Or maybe a triplex in the low-end neighborhood? Or do you do rent-to-own? Or even mortgage syndication? All of these can be good options, and it comes down to your comfort level, your time, and your anticipated return on investment.
If you own a home in Ottawa, or are buying a home in Ottawa, you will definitely want to look at the option of doing a basement apartment or legal secondary suite as an excellent way to add value to your property. Why are these investments better than most of the options out there? For a number of reasons, including: accessibility, affordability, positive cash flow, appreciation, and flexibility. Let’s be honest, condos just don’t make sense when you look at the condo fees, property taxes, and depreciation. And anyone selling a multi-unit will typically be asking an astronomical price for a very rundown building. And who can afford to play in the commercial world of buildings that are over 10 units. And this leads us right back to the attractive option of a bungalow with 2 legal units.
1. ACCESSIBILITY: You have options to choose from for these houses in Ottawa. There are a number of bungalows below $400k available for this style of investment right now. I will advise that they are in hot demand and are going quickly, but not that quickly that you can’t pick one up at a reasonable price (so long as you move quickly when they hit the market). For a more detailed list on what the best, current listings are, just ask me and I’ll forward them off to you.
2. AFFORDABILITY: As I said, many of these basement apartment bungalow properties are listed under $400k. Yes, the renovations will be costly, but with creative financing, you can have the lender pay for the construction so you won’t need to come up with that money up front. FYI, costs of construction on these things can range from $70k all the way to $150k depending on what extend you’re going to renovate the building (and yes those costs could go even higher). After the renovations are complete, and tenants are in place, you will want to refinance at 80% LTV to pull as much money out as possible. If you’re good, you won’t have too much capital left in the deal.
3. CASH FLOW: This is one of the most important words on the planet today. Cashflow is what these basement apartment buildings do best. For example, the last one I did, we took an old, ratty bungalow, and converted it to 2 legal units, with 4 bedrooms in each unit. For anyone who knows Ottawa rentals, a 4 bedroom in this city will fetch a very attractive rent. And once the building was completely refinanced, the monthly cash flow after expenses was very healthy. Contact me for more exact numbers to see the positive cash flow amounts. And bare in mind that every building is different, and each one will need to be evaluated in detail for an exact picture of the real numbers.
4. APPRECIATION: As we all know, appreciation is mostly speculation and is not to be relied on. However, for those who really know their markets, they will know what level of appreciation can be expected for a certain property in a certain city. And Ottawa may be the most predictable city in Canada, so it typically makes it easy to gauge a property’s future appreciation rate. Also, bare in mind that these are (usually) freehold, detached buildings which typically appreciate quickly in metropolitan areas.
5. FLEXIBILITY: What do I mean by flexibility? By this I mean that you own a piece of land, usually with a decent-size house, with a driveway or double-driveway, and with a front and back yard. And what this offers is flexibility for future uses down the road. Maybe you knock it down and build a larger multi-unit. Or maybe you build a 2nd or 3rd storey on the existing bungalow. Or maybe a coachhouse in the backyard. The reality is, when you have land, you typically have options that will allow for future value-adds. Consult with a Realtor or professional on what the future uses of the land may be.
It’s for these reasons, that the basement apartment or secondary suite homes are truly an excellent opportunity. And if you’re left with any doubt, contact me and we can sit down and run the numbers on various real estate investment strategies, and you’ll see that the numbers on these are typically quite a bit better than many of the options out there. I always recommend doing your basement apartment the legal way, and here’s an article that goes into some detail on that.
If you’re giving some thought to this investment option in Ottawa, Ontario, definitely contact me to go over the ins and outs of these investments. There are some excellent opportunities out there, and there also a ton of pitfalls to be careful of. Happy investing!
Sales Representative. Residential & Commercial.
Capital Homes Realty
2059 Meadowbrook Rd, Ottawa, ON
Cel: 613 262 1697
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