The guy posting from Halifax doesn't seem to know the Calgary market well enough to be able to comment on suites here.
If you are a Calgary landlord with an illegal suite that is operating nicely what incentive do you have to legalize it? There are all kinds of application fees and lots of retrofitting required and guess what your taxes usually go up too. Rents are the same regardless of whether or not you dance around the red tape required by the city. So lots of risk and cost and no reward. Not exactly a good business decision and for this reason most of the suites you will see are just as you describe
- safe with good size but are illegal in the eyes of the municipality.
The red tape exists because council cannot make up its mind on the
secondary suite issue and it wishes to have control over what suites are
where via a case by case basis which seems to come down to what mood everyone is in on the day they vote on a particular application.
Take a look here
Secondary Suites Map
You see very little trend in what applications are approved or rejected. Most are approved, but there are red dots and green dots intermixed everywhere.
I have sold dozens of "illegal" suites to investors. Investors usually fall into one of three camps:
1. "I need a fully legal suite with the paper to go with it". This camp takes the least risk but also gets the lowest return. They have to pay more than 500k usually. Can still cash flow due to better rents and properties are in better areas but you need a larger down payment.
2. "I want a safe suite but I'd like a property with the appropriate zoning so I don't need to file for a land use designation change in the event I get a complaint on my suite" These guys take the middle road and are ok with some risk but are willing to pay a little extra to have better options in the event they are forced to fight to keep their suite. They don't have to change the zoning so they can go straight to a permitted use secondary suite application.
3. "I will make my suite safe and I don't care about the zoning" These investors take the most risk but get the better returns as R1 properties are usually cheaper, newer and bigger but if there is a complaint it is much more work to get a secondary suite permit as the zoning needs to be changed. Most investors in this category have a certain 'disdain' for the city's policies and generally arrive in this bracket after doing one or two properties that fit the criteria for 1 and 2 above and see all the properties that are available.
Getting that pretty piece of paper from the city is very hard to come by on the open market and very expensive to obtain yourself. The frustrating thing for investors is that (based on the map above and countless applications behind them) there are approved suites in many communities with special amendments all over the place and functionally speaking they are no safer than what a responsible investor could accomplish themselves without the city's blessing.
Just my $0.02.