Background on Garden Suites
First things first, let’s clear up what Garden Suites are. These are detached units located on residential properties, typically housed within converted garages or purpose-built structures. Essentially, they’re like tiny houses right on your property. While some cities initially had reservations about them, in recent years, many major cities, including Toronto, Hamilton, Kitchener, and Waterloo, have embraced the concept and enacted bylaws allowing their construction or conversion.
What’s fascinating is that these suites are permitted on most residential lots, whether they’re in the poshest neighborhoods or less glamorous ones. This means that anyone with the right property can potentially capitalize on this trend. Of course, there are costs involved, but we’ll get to that in a bit.
The Benefits of Garden Suites
Let’s talk about why Garden Suites are gaining traction and why you should seriously consider them. These units are still a relatively new phenomenon in Ontario, which means many people aren’t even aware of their existence or potential benefits. I’ve had the privilege of assisting several clients in finding properties with potential for Garden Suites over the past year, and the results have been fantastic.
Cash Flow Magic
One of the standout advantages of Garden Suites is the cash flow they can generate. If you have a property with a main unit and a basement unit, you’ve probably noticed that these setups often struggle to break even, even in a city as promising as Hamilton. That’s where the third unit comes into play, bringing in an extra $2,000 or more in monthly cash flow. This is a game-changer, especially in today’s interest rate environment.
Tenants love Garden Suites. These detached units offer a level of privacy and comfort that is hard to match in typical apartment or basement units. They often feel like brand-new houses since they’re constructed from scratch, which means more options for tenants and happy, long-term renters for landlords.
Garage Conversions: A Cost-Effective Option
Now, let’s focus on garage conversions, a particularly cost-effective way to add a Garden Suite to your property. While building a suite from the ground up can be expensive, converting an existing garage can save you a substantial sum, sometimes up to $100,000 to $150,000. Garage conversions are often more straightforward and budget-friendly than constructing new structures, making them an attractive option for investors.
To maximize the potential of a garage conversion, look for garages that are at least 400 square feet in size. This space allows for the inclusion of at least one bedroom, making it an ideal starting point.
Investment Strategy: A Winning Combo
The real magic happens when you combine a Garden Suite with a basement conversion. Here’s how it works: You buy a property, do a basement conversion, which substantially increases the property’s value, then refinance it to release funds. These funds can be used to create the third unit – the Garden Suite. The result? You have three rental units under one roof, generating a significant return on investment.
The Cost Breakdown
Let’s talk dollars and cents. While it’s true that Garden Suites involve a financial investment, the return on investment is substantial. These projects are ideal for investors considering a duplex conversion or higher because you’ll need a similar level of capital. For example, if you’re buying a $700,000 property in Hamilton, your initial investment (down payment, closing costs, etc.) might be around $100,000 to $150,000. A basement conversion might cost you another $100,000 to $120,000.
Here’s the game-changer: Once you refinance the property, you can recoup 60% to 70% of your total investment, which can then be used to fund the creation of the Garden Suite. While your mortgage costs might increase slightly, you’ll more than make up for it with an extra $2,000 in monthly rent. It’s an investment that pays for itself in less than four years.
Hamilton: The Ideal Location
I’ve got to say, Hamilton is one of the best cities for Garden Suites due to its affordability and favorable zoning regulations. With the right guidance, you can make the most of this opportunity and benefit from a high return on investment.
If you’re intrigued by the Garden Suite concept and want to explore opportunities in Hamilton or need assistance with the process, don’t hesitate to reach out to me. I have helped clients with 4 projects in the 12 months on these units. I have the knowledge, connections with experienced contractors, and a keen eye for identifying suitable properties for Garden Suites. Let’s make your real estate dreams a reality – it’s an investment that’s bound to grow in value, literally and figuratively.