Vancouver's Real Estate Market

[Special K]

Maybe I’m wrong, but I thought landlord need to occupy at least 50% of your house to be considered your primary residence. Otherwise, it’s an investment property.

We have rental income with basement suites and we offset the rental income with interest, utilities, property tax (?), etc. Every year it’s still a huge outflow of cash to RRSP. If we have the cash, we contribute to RRSP because I feel like that money is gone paying tax right away.

[supafamous]

Originally Posted by Special K

Maybe I’m wrong, but I thought landlord need to occupy at least 50% of your house to be considered your primary residence. Otherwise, it’s an investment property.

We have rental income with basement suites and we offset the rental income with interest, utilities, property tax (?), etc. Every year it’s still a huge outflow of cash to RRSP. If we have the cash, we contribute to RRSP because I feel like that money is gone paying tax right away.

https://www.canada.ca/en/revenue-age...residence.html

It's long read so I won't find the specific clause you mention but it sounds like a reasonable rule - if I do a build and rent out the basement and laneway I'll just make it under wire and will be living in about 55-60% of the house. There's a whole host of tax complications with being a landlord of a house that's also your principle residence - I'm just kicking it all to my kid when I die, she's getting enough money from me anyways. But since my parents and in-laws are eventually going to live with us I'm only dealing with rental income in some years of my ownership (making it even more complicated).

[carsncars]

Originally Posted by Sw0op

the strata vs house property will forever be a debatable argument..just a matter of if you want to be a landlord or not...however having the OPTION of renting out is enticing i'd say...like when the time comes you're fed up with it you can take over the space and turn it in to a man cave or inlaw suite or maybe have your kids roam there but you cant do that in a strata property...you'd have to sell and upsize and if its anything like today's market...good luck with that...in the end its the price you want to pay for control....

Honestly this was our exact thought process. We decided we wanted a home with a separate entry basement suite, not because we need to rent it in order to make the mortgage payment, but because it's nice to have the option.
- We can rent it while we're childless
- We can take our time finding a tenant we like
- The extra $ is nice to fund renovations or luxuries like travel
- If we stay 10+ years, good if an elderly parent needs to move in
- Likely makes it easier to sell later

[twitchyzero]

the inlaw/parent units best be ground floor without stairs
something to consider even if they're able-bodied now

[EvoFire]

Originally Posted by twitchyzero

the inlaw/parent units best be ground floor without stairs
something to consider even if they're able-bodied now

That's exactly what we are thinking about right now. Dad is 68, mom is 60. They are still independent, but give it a few more years we'll need something relatively flat and at most half a dozen stairs for my dad.

Dad won't give up his sports car still despite starting to have a hard time getting in and out. Gonna be a fight on my hands as he gets older.

[carsncars]

Originally Posted by twitchyzero

the inlaw/parent units best be ground floor without stairs
something to consider even if they're able-bodied now

Definitely was a consideration. We managed to find a home with a zero-entry basement suite, but it wasn't on our "must-have" list as that would've narrowed our search a little too much.

[supafamous]

Originally Posted by twitchyzero

the inlaw/parent units best be ground floor without stairs
something to consider even if they're able-bodied now

100%. I just convinced the wife that it's worth giving up 6' of our backyard to build the laneway as a 1 story so the parents don't have to walk up the stairs.

It's tricky to find homes with ground floor units ever since the RS-1 standard was updated to allow basements (about 20 years ago I think). I know the city is reviewing the RS-1 rules and allowing the basements to be higher is a strong consideration as the current rule often forces basements to be cellars (nearly all the way below ground) and that's not very liveable. The new regs will probably allow RS-1s to be 2' higher, not all the way out of the ground but enough that the steps are fairly small (the basement would be 2-3' below ground).

[HonestTea]

Originally Posted by supafamous

100%. I just convinced the wife that it's worth giving up 6' of our backyard to build the laneway as a 1 story so the parents don't have to walk up the stairs.

It's tricky to find homes with ground floor units ever since the RS-1 standard was updated to allow basements (about 20 years ago I think). I know the city is reviewing the RS-1 rules and allowing the basements to be higher is a strong consideration as the current rule often forces basements to be cellars (nearly all the way below ground) and that's not very liveable. The new regs will probably allow RS-1s to be 2' higher, not all the way out of the ground but enough that the steps are fairly small (the basement would be 2-3' below ground).

How will you decide who gets to live in the basement suite or LWH between your parents or in-laws?

[sonick]

Originally Posted by HonestTea

How will you decide who gets to live in the basement suite or LWH between your parents or in-laws?

[supafamous]

Originally Posted by HonestTea

How will you decide who gets to live in the basement suite or LWH between your parents or in-laws?

Whoever gives us the bigger inheritance.

[Traum]

Originally Posted by HonestTea

How will you decide who gets to live in the basement suite or LWH between your parents or in-laws?

Difficult to say which one is the more appealing suite though...

[Gerbs]

LWH over basement any day lol, at least you get sunlight and no noise from upstairs.

[carsncars]

Originally Posted by Gerbs

LWH over basement any day lol, at least you get sunlight and no noise from upstairs.

Personally I agree, but some people might prefer basement suite over LWH - aforementioned issues with steps, the idea of living over/beside a garage, generally smaller floorplan, etc.

[Gerbs]

My basement unit has a ton of stairs to get down as well. But I can definitely see the convenience if you're on the main level basement.

[mikemhg]

Originally Posted by Sw0op

$2-$3M may seem a lot but all they really need is 20% down which they can prob get from parents and then they can likely afford the rest off mortgage through personal/rental income

with all these homes being built with "rental income"..you can probably rent out the basement/lwh for $4-5k/month which garners ~$1M in mortgage...and theres a lot of ppl making 150k+ household income (you can see in the previous examples here on RS)...thats another ~$1M in mortgage obtained...so yea not surprised people are looking at the mid $2M mark if they have the 20% down...

Who the fuck pays $4-5K per month to live in a basement suite?

There has to be a proverbial tipping point here.

[EvoFire]

Originally Posted by mikemhg

Who the fuck pays $4-5K per month to live in a basement suite?

There has to be a proverbial tipping point here.

That's the combined rent of 2 basement suites AND a laneway house, not just 1 suite.

[Hakkaboy]

Originally Posted by Sw0op

yea payments for him is going to be around the $7-8k/month range i'd imagine but most of it is going in to principal. His $1.8M mortgage lets say he'll pay about $20k interest a year....and half of that he can probably write off due to rental income so thats $10k/year in interest relevant to rental income...if he's getting say $55k/year in rental, $45k of that amount after interest will be contributed towards his capital which i guess puts his $700k ROI @ 6.5%/year

the strata vs house property will forever be a debatable argument..just a matter of if you want to be a landlord or not...however having the OPTION of renting out is enticing i'd say...like when the time comes you're fed up with it you can take over the space and turn it in to a man cave or inlaw suite or maybe have your kids roam there but you cant do that in a strata property...you'd have to sell and upsize and if its anything like today's market...good luck with that...in the end its the price you want to pay for control....

even if it doesnt appreciate and maintains its level...having ppl pay half of your mortgage while you live in a bit of luxury is nice to have albeit greedy but thats today's society

Totally agree with you that having the OPTION to rent out is great. However, if you can't afford the place WITHOUT rental income making up half your mortgage payments, then I would say that you can't actually afford the place. Unfortunately the banks disagree with me on this, and that's why we have people thinking paying over $2M+ for a property just so that they can rent away half the place is actually palatable.

Hopefully they don't play victim to the tenant horror stories we hear about, because that would be catastrophic

[Hakkaboy]

Originally Posted by supafamous

Well there are some other considerations with the chief one being that my parents and my in-laws are in their 70s and we want to be able to take them in when the time is right. I still want my own private space so they could take the suites/laneway when the time is right and as they'd be downsizing they'd help pay down the mortgage while they live with us. When my kid grows up she can go live in one of the suites as well or when my wife and I get old we'll trade places. I want to build a multi generational house for us.

I considered other options like buying an old Van Special and renovating it but a proper down to the guts renovation is $350-500k and the Van Special still runs you $1.6m so it actually costs more out of pocket as it only has 1 rental suite (A boxy Van Special is about 2400-2600sf vs 3600sf of a new house/laneway. The way the zoning is setup nowadays (you can build more today than you used too) it makes a lot of sense to just go build/buy a new house with a laneway b/c the rental income covers so much of the mortgage (as long as you don't mind being a landlord).

Scenarios:

1200sf townhouse for $1-1.1m, no rental income
1600sf duplex for $1.4-1.5m, rent basement out for $1400
2400sf renovated Van special for $2m, rent basement out for $2k
3600sf new house with laneway for $2.5-2.7m, rent suites out for $4-5k

In the last scenario I get to live on the top 2 floors (1800sf) which is more space than any of the other options too.

It's kinda nuts the way it works out - it's almost a case of the rich getting richer here (I'm not actually rich since I have to pay Vancouver rates for real estate). I make a bunch of other people pay for something I bought and I get to keep it.

I get why you want a SFH. It's price that's ridiculous. I hope everything works out for you and your extended family and you don't over extend yourself chasing this crazy market.

[mikemhg]

Originally Posted by EvoFire

That's the combined rent of 2 basement suites AND a laneway house, not just 1 suite.

Ahh I see. So that's the game now? Build a laneway home and rent it out along with your basement, in order to afford a single family home in Vancouver?

Cool.

Sounds like a bright future.

[Ch28]

Originally Posted by mikemhg

Ahh I see. So that's the game now? Build a laneway home and rent it out along with your basement, in order to afford a single family home in Vancouver?

Cool.

Sounds like a bright future.

That's pretty much what most of East Vancouver is. Just take a drive down some alleys and you'll see more and more LWH.

I agree with Hakkaboy's take on all of this. You need to reconsider attempting to purchase a detached if the only way you can afford it is by renting out half the house AND a laneway. What happens if one or both of the basement suites go empty? What happens if the LWH goes empty? Even worse, what will happen with your mortgage if you're stuck with 3 shitty tenants that end up squatting or not paying rent?

[Gerbs]

Originally Posted by mikemhg

Ahh I see. So that's the game now? Build a laneway home and rent it out along with your basement, in order to afford a single family home in Vancouver?

Cool.

Sounds like a bright future.

There's nothing we can do though other than move to Kelowna

[Sw0op]

Originally Posted by Hakkaboy

Totally agree with you that having the OPTION to rent out is great. However, if you can't afford the place WITHOUT rental income making up half your mortgage payments, then I would say that you can't actually afford the place. Unfortunately the banks disagree with me on this, and that's why we have people thinking paying over $2M+ for a property just so that they can rent away half the place is actually palatable.

Hopefully they don't play victim to the tenant horror stories we hear about, because that would be catastrophic

why not?
income is income isnt it? as long as its reliable, stable, and legit right? there's risks to everything...your job..your property.....if anything having rental income is favorable in my mind as you have multiple streams of income sources...what if you lost your job due to another pandemic? or your business was forced to close for 6+ months...people still need shelter at the end of the day...

it seems as though banks are discounting the value of rental income (ie. a $1 in rental income yields less mortgage amount than $1 in regular income i beleive) so if anything happens on the rental side they're still negtively affected but probably not as much as you think

people have been doing this for like 10 years now...and this is how their wealth was built/added on thats all...10 years their mortgage is like half paid off already and we're at a lower interest rate environment now than we were back then

[Sw0op]

Originally Posted by Ch28

That's pretty much what most of East Vancouver is. Just take a drive down some alleys and you'll see more and more LWH.

I agree with Hakkaboy's take on all of this. You need to reconsider attempting to purchase a detached if the only way you can afford it is by renting out half the house AND a laneway. What happens if one or both of the basement suites go empty? What happens if the LWH goes empty? Even worse, what will happen with your mortgage if you're stuck with 3 shitty tenants that end up squatting or not paying rent?

i think if worst case if you get 3 shitty tenants...it takes like what 3-6 months to kick them out? you would hope that they have 10-20k worth of savings to offset such an event...which as you can see with the previous poster looking to build he's got that buffer in case something like that happens...and even then if you can get by with maybe 1-2 years of good rent with good tenants...i would think you'd have that buffer built up if not more by then

however if one or both suites or the laneway go empty and undesirable...well that would mean vancouver's housing problems for the past few decades of low supply and high rents just suddenly disappeared!

[supafamous]

Originally Posted by Ch28

That's pretty much what most of East Vancouver is. Just take a drive down some alleys and you'll see more and more LWH.

In East Van there really isn't a real single family home anymore and it hasn't been that way in a long, long time - pretty much every house has at least 1 rental suite and even duplexes have them and now we're seeing it with a few townhomes.

It's only on the West side that we see homes without suites and even then all the new builds have one now. They just usually skip the laneway as those folks have a lot of cars and/or want the privacy.

Here's some data from 2016 on how many homes in Vancouver have a suite: https://doodles.mountainmath.ca/blog...tes-and-taxes/
Here's COV data from 2009, see page 12: https://vancouver.ca/docs/policy/hou...ary-suites.pdf

You'll see that East Van has a very high percentage of suites and that's just people declaring it on their taxes - it's probably close to 70-80% of SFH have suites today.

Originally Posted by Ch28

I agree with Hakkaboy's take on all of this. You need to reconsider attempting to purchase a detached if the only way you can afford it is by renting out half the house AND a laneway. What happens if one or both of the basement suites go empty? What happens if the LWH goes empty? Even worse, what will happen with your mortgage if you're stuck with 3 shitty tenants that end up squatting or not paying rent?

I don't think I said it outright and maybe I implied it but I don't have a problem affording a new build with no rental income, it's just that I don't want to spend my money that way.

I want flexibility to house my parents and in-laws, a yard + garage, and, if possible, someone else to pay my mortgage. Those 3 criteria leads me down the path of a new build where I rent out a good chunk of it when it's not in use by my parents/in-laws. I only personally need 1800sf and a place to grill meat and entertain, the other parts of my life add on some additional needs.

I hinted at it but I'm totally serious that the garage in the laneway is needed to house a Porsche. I've been very, very fortunate the last 10 years with work and with some steady rental income it means I get to fly to Germany to pick up a 911 in a few years time (Wife might downgrade me to a Cayman).

That all said, I've been renting to people for 12 years and never had a bad tenant - maybe I'm lucky (I know people who have had shitty tenants) but maybe I've vetted well and treated them well enough that they treat me well. In 12 years I've only had 1 month where I didn't have a tenant and that was b/c COVID hit right as my tenant moved out.

[twitchyzero]

Originally Posted by carsncars

We managed to find a home with a zero-entry basement suite.

how does that work? just a mild grade to the door? must be a big lot?

unrelated, but how come we dont see space-saving spiral staircases (indoor and outdoor) in modern builds..aside from probably tricky to move furnitures and you lose storage space underneath. Not a fancy one just cookie cutter minimalist metal one for example