The pros and cons of taking a tenant in home or condo | #Toronto #realestate #real_estate

The pros and cons of taking a tenant in home or condo

Management companies can do the work — for a fee

Real estate agent Jasmine Parsons, above, says homes with a

Real estate agent Jasmine Parsons, above, says homes with a “mortgage helper” suite are in great demand in Victoria. Not everybody wants the suite for a paying tenant, though: “In-law” suites allow three generations to live under one roof, right.

Photograph by: Darren Stone, Times Colonist, Times Colonist

Most first-time single family home buyers in Victoria look for houses that have the potential for a basement suite, say mortgage experts. There’s a reason these suites are referred to in advertisements as “mortgage helpers.”

The Canadian Real Estate Association lists Victoria house prices as the second most expensive in the country. Taking in a tenant is the only way for many young homebuyers to keep their heads above water.

“If you don’t mind the loss of privacy, renting a downstairs suite is the easiest way to augment your income,” says Ted Jones, an accredited mortgage professional. “It enables you to buy up — to afford more of a mortgage than one just based on personal income.”

He says income from a mortgage-helper gives many first-time buyers an opportunity to move out of a condominium. Banks use the rental income as a determinant for how much an applicant can afford. Canada Mortgage and Housing guidelines allow 50 per cent of the gross rental income to be included in the borrower’s gross annual income for the purposes of calculating the borrower’s total debt service ratio — the maximum amount a person can effectively borrow.

“Without a rental suite I couldn’t have dreamed of owning a house,” says Joanne Sapala, a single mom with an 11-year-old son. “I was previously living in a condo and in order to afford a house, in my price bracket I had to find one with a suite.”

The 750-square-foot, one-bedroom suite downstairs, complete with it’s own laundry room, is rented for $850 a month.

Unfortunately Sapala recently lost her job and decided it was best to sell her house. It sold in one day. Her real-estate agent, Jasmine Parsons, was not surprised.

“The majority of my younger clients are looking for houses with a suite downstairs,” says Parsons, of One Percent Realty, Vancouver Island. “For the most part it allows them to qualify for more of a mortgage — [which permits] a better house.”

She says that sometimes the extra room is not for any financial gain but to house extended family members under one roof — a true in-law suite. Rentals are a possibility later, after children grow and leave home or when parents seek other accommodation.

She estimates a house with a suite can, on average, sell for between five to eight per cent more than a comparable house without one. Typical rents for a one-bedroom suite can range from $750 to $900. A two-bedroom can command between $900 to $1,300.

Renting out a residence also applies to condominiums. Owners who find they have been transferred to another city and who desire to return and investors hoping for future real-estate appreciation would likely rent their condos.

“It’s about affordability,” says Tony Gioventu, executive director of the Condominium Home Owners’ Association of B.C. “Most investors don’t have the ability to buy a 20- or 30-unit apartment building, but they can afford to buy individual condos and rent them out.”

Buyers should consult with the individual strata plans to make sure the particular building allows rentals. Having rental units in a building does not adversely affect resale either, he says.

But renting out a home or apartment can be a pleasure or a pain in the butt. It’s Jason Middleton’s job to manage rental property and make sure it’s the former.

“People entrust me with their biggest asset,” says Middleton, president of Cornerstone Properties, a property management company. “We step into the shoes of the owner to make sure everything runs smoothly.”

He says the side of his business that manages rental properties has grown by more than 33 per cent in the past six years. Some of his clients are out-of-town people who have bought property in this area with the plan of moving in when they retire. Others are investors who hold on to property in the hope of future capital gains.

His services include marketing the suite, screening potential tenants, collecting rent, maintenance and dealing with the strata council. He boasts a rental default rate of about half of one per cent.

In the last year, he has seen a new type of client as developers — caught in the economic downturn — put unsold condo units into the rental pool so that they can generate some cash flow until the properties can be relisted when the market improves.

With the local vacancy rate hovering around one per cent, demand usually outstrips supply. Middleton says the vacancy rate has risen from half a per cent due to losing clients to the downturn and low interest rates. Lower condo and house prices combined with historically low interest rates made paying a mortgage about the same as paying rent, turning some renters into first-time home buyers, and in some cases, landlords themselves.

parrais@tc.canwest.com

Posted via web from Toronto Real Estate News, Blog

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About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

One Response to The pros and cons of taking a tenant in home or condo | #Toronto #realestate #real_estate

  1. Pingback: The pros and cons of taking a tenant in home or condo | #Toronto … Card on me

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