Their belief is they cannot be shut down (at least in downtown Toronto) because of the shortage in rental accommodations. I tend to agree as I don't see a way out of the rental shortage situation. These chopped up houses are one step up from illegal rooming houses.
Illegal Suites
- Thread starter nickek
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[quote user=RedlineBrett]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.
All else being equal (rents, location, condition, etc) what would you estimate the difference in price would be between option 1 and 2? If someone bought a house with the correct zoning, and then had a complaint/got shut down, how much of the cost of going through the secondary suite application would be able to be recovered on sale?
Regards,
Michael
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.
All else being equal (rents, location, condition, etc) what would you estimate the difference in price would be between option 1 and 2? If someone bought a house with the correct zoning, and then had a complaint/got shut down, how much of the cost of going through the secondary suite application would be able to be recovered on sale?
Regards,
Michael
- Joined
- Sep 5, 2007
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- 196
In Edmonton they aren't super bad on the suites depending on the inspector really. The city gets sooo many complaints, lack of employees to follow up. It took them 4 months after my deadline to comply. It was a simple solution of fix what they asked for.
But really if you have a decent tenant and do good property managing, the only time you get busted is when the tenant calls the authority on you. I had "problem" tenant that did that.
So research t he reality of having a suite in the city and talk to other people who got "busted" When you understand the rules and system there are few surprises.
But really if you have a decent tenant and do good property managing, the only time you get busted is when the tenant calls the authority on you. I had "problem" tenant that did that.
So research t he reality of having a suite in the city and talk to other people who got "busted" When you understand the rules and system there are few surprises.
- Joined
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- 4,733
A few thoughts:
The tools are there to shut down illegal suites if a city wants to + willing to dedicate funds to
The distinction between legal and illegal might (or might not) soon change throughout Ontario to be based on safety requirements (eggres's, fire seperations, ESA, etc..) and other requirements (parking, etc..) but not zoning
The provincial government wants to increase the supply of affordable housing. Many cities have a different vision.
The tools are there to shut down illegal suites if a city wants to + willing to dedicate funds to
The distinction between legal and illegal might (or might not) soon change throughout Ontario to be based on safety requirements (eggres's, fire seperations, ESA, etc..) and other requirements (parking, etc..) but not zoning
The provincial government wants to increase the supply of affordable housing. Many cities have a different vision.
I am shocked at how few people actually complain. I can't imagine owning a $700,000 dollar home in downtown Toronto and some investor buys next door and chops the house up into an illegal 4 plex contradicting the bylaws. Yet, this must be exactly what's going on all the time.
Canadians are so nice and shy.
Canadians are so nice and shy.
- Joined
- Aug 31, 2007
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- 493
I live in an area with many "single family" homes with illegal suites. I've seen people add basement apts, which the zoning in Toronto allows, but I have never seen anyone convert a single family illegally into a 4 plex. In fact, I see many illegal multi unit properties being converted back to single family or single family with basement apt.
Wow! You are not really looking then. Just look at the MLS! Downtown Torionto is full of illegal 3 & 4 plexes. I would say 99% of what is listed and sold are illegal. If it does nor say it's legal, it is because illegal! I spent a year looking for a legal one and know foe a fact the majority are illegal. Some one converted them. It did not just happen on it's own. Lol.
The city of Brampton used the MLS to locate them and crack down on this epidemic. The City of Toronto is near bankruptcy and has other more important problems like plugging the hole in their tax bucket. Many are liberally drinking from it at tax payers expense!
As far as turning a blind eye away from illegal 3 and 4 plexes so as to encourage affordable rentals, i don't know ifvi buy this anymore. Couldn't all cities take this same position then?
The city of Brampton used the MLS to locate them and crack down on this epidemic. The City of Toronto is near bankruptcy and has other more important problems like plugging the hole in their tax bucket. Many are liberally drinking from it at tax payers expense!
As far as turning a blind eye away from illegal 3 and 4 plexes so as to encourage affordable rentals, i don't know ifvi buy this anymore. Couldn't all cities take this same position then?
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The difference could be that the houses were chopped into apartments years ago? So maybe no new houses are being converted to plex's, but the old ones sell on mls regularly?
I know a situation similar to this in an inner city calgary neighbourhood. There are a few old houses that are cut up into apartments. However, the land is so valuable that any time one comes up it usually gets ripped down and the lot used to build luxury attached houses.
I know a situation similar to this in an inner city calgary neighbourhood. There are a few old houses that are cut up into apartments. However, the land is so valuable that any time one comes up it usually gets ripped down and the lot used to build luxury attached houses.
The cap rates on the newlyconverted illegal plexes is 60% better. They yield caps as high as 8-9%. The property taxes are less too since they are taxed as a single family home. This is why It's big business. What's the incentive to buy a legal plex and pay a high price for a lower return to pay double the property taxes.
- Joined
- Sep 18, 2007
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[quote user=Lucy] What's the incentive to buy a legal plex and pay a high price for a lower return to pay double the property taxes.
Hi Lucy,
You raise a valid point. However, I do want to mention that in Toronto and more specifically in the Toronto Beaches, legal income properties such as legal duplexes/triplexes/4-plexes are valued at a premium because there is a shortage of supply. So the benefit of actually buying an illegal income property is the potential of converting it into a legal income property and gaining a significant amount of value.
On average, legal income properties generally are better quality than illegal income properties which also holds value to it. This also allows you to offer potential tenants a better quality suite for a premium in rents.
It's amazing how much potential there is in Toronto when it comes to quality and legality. Although you are paying a premium for it, your cash flow is actually very solid compared to what the majority believe.
Hi Lucy,
You raise a valid point. However, I do want to mention that in Toronto and more specifically in the Toronto Beaches, legal income properties such as legal duplexes/triplexes/4-plexes are valued at a premium because there is a shortage of supply. So the benefit of actually buying an illegal income property is the potential of converting it into a legal income property and gaining a significant amount of value.
On average, legal income properties generally are better quality than illegal income properties which also holds value to it. This also allows you to offer potential tenants a better quality suite for a premium in rents.
It's amazing how much potential there is in Toronto when it comes to quality and legality. Although you are paying a premium for it, your cash flow is actually very solid compared to what the majority believe.
nickek -------You're right, there probably isn't a 'yes' or 'no' answer to this kind of situation.-----
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There ABSOLUTELY is a yes or no answer to this kind of situation.
If you can't cashflow without the illegal suite and you don't want to or can't afford to feed the property your answer should be a definite NO.
I have heard of far to many new investors investing in illegal suites only to have the city shut them down. There is nothing that will turn you off of real estate investing faster than owning a property you cannot afford to keep because you lost the income from an illegal suite.
New investors pleeeeeease remember this when you are looking at properties and your realtor tells you, "Oh don't worry about it being an illegal suite! This property has had this basement rented out for years with no problems."
If you can't afford to carry the property without the rental income from the illegal suite don't buy it or at least factor that into your negotions for a lower purchase price.
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There ABSOLUTELY is a yes or no answer to this kind of situation.
If you can't cashflow without the illegal suite and you don't want to or can't afford to feed the property your answer should be a definite NO.
I have heard of far to many new investors investing in illegal suites only to have the city shut them down. There is nothing that will turn you off of real estate investing faster than owning a property you cannot afford to keep because you lost the income from an illegal suite.
New investors pleeeeeease remember this when you are looking at properties and your realtor tells you, "Oh don't worry about it being an illegal suite! This property has had this basement rented out for years with no problems."
If you can't afford to carry the property without the rental income from the illegal suite don't buy it or at least factor that into your negotions for a lower purchase price.
- Joined
- Nov 13, 2007
- Messages
- 122
I am considering applying for land use re-designation from R1 to R1S (or may be R2 for future potential) for my property in Forest Lawn, after I got shut down by the city. I wish to learn from other fellow REIN members who have been through the process to see if it is worth the hassle and the cost. Besides, I wish to know what are the chances of getting approved!!!
My hope is that by October the council will approve all our suites and all this issue will be history. Until then, we all have to get active and write letters to our city councillors.
Cheeers
My hope is that by October the council will approve all our suites and all this issue will be history. Until then, we all have to get active and write letters to our city councillors.
Cheeers
- Joined
- Oct 24, 2007
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- 2,289
[quote user=MichelSelim]
My hope is that by October the council will approve all our suites and all this issue will be history. Until then, we all have to get active and write letters to our city councillors.
Cheeers
This won't happen this quickly. Such approvals will come in the form of allowing secondary suites as a permitted use for a broader scope of land use designations.
In order to have a secondary suite you will still have to file for a development permit, get one approved, file for a building permit, get one approved, do the work , get an occupancy permit pay more taxes etc.
Rest assured even if we see more pro-secondary suite legislation there will still be a lot of red tape.
My hope is that by October the council will approve all our suites and all this issue will be history. Until then, we all have to get active and write letters to our city councillors.
Cheeers
This won't happen this quickly. Such approvals will come in the form of allowing secondary suites as a permitted use for a broader scope of land use designations.
In order to have a secondary suite you will still have to file for a development permit, get one approved, file for a building permit, get one approved, do the work , get an occupancy permit pay more taxes etc.
Rest assured even if we see more pro-secondary suite legislation there will still be a lot of red tape.
- Joined
- Aug 30, 2007
- Messages
- 320
I second Brett's thoughts.
I have survived the process in Red Deer and it has been time consuming and has required persistence. I think Red Deer's process is more onerous than Edmonton's, but less so than Calgary's.
It took us 1.5 years to get through it all, and only because we were proactive towards our goal. I believe legalizing your suited properties are the way to go, but educate yourself (reassess your properties through the city's eyes), pray for patience and discipline, have a healthy financial reserve, and double your estimates.
I have survived the process in Red Deer and it has been time consuming and has required persistence. I think Red Deer's process is more onerous than Edmonton's, but less so than Calgary's.
It took us 1.5 years to get through it all, and only because we were proactive towards our goal. I believe legalizing your suited properties are the way to go, but educate yourself (reassess your properties through the city's eyes), pray for patience and discipline, have a healthy financial reserve, and double your estimates.
- Joined
- Jul 6, 2009
- Messages
- 2
Has anyone had experience legalizing suites in Calgary that had the correct zoning? I know a lot of people have put in their comments on legality and neighbours complaints but has anyone worked through the process? I know the land use amendment is near impossible so what's story if they correct zoning exists?
2 of our properties have the zoning and the correct lot size under the bylaw and I want legal suites in my porfolio.
2 of our properties have the zoning and the correct lot size under the bylaw and I want legal suites in my porfolio.
- Joined
- Aug 29, 2008
- Messages
- 68
I thought I'd bump this interesting thread on "Illegal Suites' as I've been reading and receiving emails regarding this exact topic...
Thomas
Thomas
- Joined
- Jul 6, 2009
- Messages
- 2
I have completed the Change of Use Development Permit application through the City and am two weeks from turning over my first legal suite conversion. I have my second permit application approved and will be starting construction next month.
Here are some of my learnings:
-It is helpful bringing in a consultant for the permit process and drawings. I have done DPs for my day job so I have had experience with multiple firms in Calgary.
-The Alberta building code has some requirements that make your head shake such as a different HVAC system for each suite, while missing some important points - no need for fire rated drywall between the suites.
-Getting a BP and DP approved takes time, 8-10 weeks excluding getting the plans done so plan for it, buy materials, get plans done before you close. You can submit your application the day you close; with the sellers blessing you can apply before you close.
-Make sure your contractors are good, there are all kinds of inspections completed by the city before its done and having quality contractors will help. Our GC works almost primarily for us so this gives us lots of advantages.
-Meeting your requirements, carrying costs, meeting city requirements, and building code requirements is expensive. We have done full gut and renos for 29 / sqft and gotten very good results (stainless steel appliances, granite, high end tiles, professional photogrpahers, staging) but these projects cost a lot more. In planning our third project we are looking at 60-80 / sqft for basic finishes.
-We have turned this into an important part of our business and we have 5 projects underway or in the planning stages.
Anyone who wants to pick my brain or would like to partner with us, send me a message. I would be happy to share what we have been doing.
Nav Damji
Equium Group
Here are some of my learnings:
-It is helpful bringing in a consultant for the permit process and drawings. I have done DPs for my day job so I have had experience with multiple firms in Calgary.
-The Alberta building code has some requirements that make your head shake such as a different HVAC system for each suite, while missing some important points - no need for fire rated drywall between the suites.
-Getting a BP and DP approved takes time, 8-10 weeks excluding getting the plans done so plan for it, buy materials, get plans done before you close. You can submit your application the day you close; with the sellers blessing you can apply before you close.
-Make sure your contractors are good, there are all kinds of inspections completed by the city before its done and having quality contractors will help. Our GC works almost primarily for us so this gives us lots of advantages.
-Meeting your requirements, carrying costs, meeting city requirements, and building code requirements is expensive. We have done full gut and renos for 29 / sqft and gotten very good results (stainless steel appliances, granite, high end tiles, professional photogrpahers, staging) but these projects cost a lot more. In planning our third project we are looking at 60-80 / sqft for basic finishes.
-We have turned this into an important part of our business and we have 5 projects underway or in the planning stages.
Anyone who wants to pick my brain or would like to partner with us, send me a message. I would be happy to share what we have been doing.
Nav Damji
Equium Group