We took a long time reaching our decision to add a rental suite to our home. Having an income suite in your home is pretty common in our city, especially for first-time buyers. Real estate is so expensive here that many people simply can't afford to buy a home without one.
Yet when Mr. Hutch and I bought this house, our first together, we were particularly happy to not have to be landlords. My brother and sister-in-law had done it, and we'd seen them have to deal with some major headaches (a basement suite that flooded with backed-up sewage while they were on holiday in Europe, for instance). We Hutches looked at each other and said, "glad we don't have to deal with that shit!".
Sigh, we were so young and stupid.
Fast-forward four years and two kids: it was suddenly apparent that our cute little house wasn't going to cut it much longer. We started discussing our options.
The first was to sell our house and buy a new one that was better suited for our family. We had a couple of realtors come by and give us an estimate of the market value of our house. They were pretty much in agreement: one came in at $470,000-$480,000 and the other at $475,000 to $485,000. Using a valuation of $475,000, I ran some numbers. I figured that if we sold our house at that price, once we paid the realtor's commission, paid out our line of credit, our mortgage and other various fees, we'd walk away with around $80,000. We agreed that to buy a new house with the kind of space we wanted, we were looking at paying at least $550,000. Once we paid property transfer tax on a house at that price, we would have only about $70,000 to put down. That's a high-ratio mortgage, so cue the extra CMHC insurance premiums (to the tune of nearly $10,000). That meant a mortgage of around $500,000. I think I vomited then. If I recall, my exact words were, "no f***ing way am I taking on a mortgage of a half-a-mil". Never mind that a house in that price range was still going to need work. That option died a pretty quick death soon after.
The next option was to price out finishing our basement. We brought in the big guns to give us an estimate; the kind of company that specializes in basement renovations and have all kinds of fancy ideas about digging them out, raising them up, pouring new foundations and the like. They told us that to get our basement structurally sound, to able to start building something would cost around $80,000. Again: I think I vomited.
I remember those being some pretty dark days. I felt totally trapped by our home. It was made doubly worse by the fact that I blamed myself. It was me who really pushed to buy this house, and for no better reason that I thought it was pretty. Now we had no viable options to get out and raise our family in the kind of home that we had hoped.
Some time passed and we decided to get a second, and even a third, opinion. We have a couple of friends who are contractors and both told us we could do something with our basement for less than the first company estimated. It wouldn't have ceilings quite as high, or as much usable square footage, but it would still work. One estimated we could finish a suite for around $70,000 and the other said we could do it for closer to $50,000 or $60,000. While still a lot of money, we figured these were numbers we could manage. Turns out the first contractor friend was just about spot on. At the end of all this, we will have sunk around $70,000 into the basement, and the additional workshop Mr. Hutch built in the backyard to house all his tools and things that could no longer live in the basement.
So did we make the right decision? I'm still not really sure. At the end of the day though, we own a house in a neighborhood that we love. We'll have some extra income for as long as we decide to rent out the suite. And having uncovered nearly every square inch of this place, we feel safe knowing that we've found and fixed all the problems. We wouldn't have that confidence in a new place, even if it had been renovated by someone else. Which probably wouldn't have happened anyway. We couldn't have afforded a home that had already been renovated!
So whether it was the right choice or not, we feel like we made a great decision for our family.
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