Whether to build a garage onto an RTO or not??

[TangoWhiskey]

I'm renovating a single family home on a huge 9000 sq ft lot to put into my RTO holdings and the contractor has offered to build a detached garage, taxes in, for 22K if I lease it to him for 3 years until the RTO contract is executed. He will pay 450/month paying 1 year in full to start.



What do people think of the numbers on this proposal?



How much should be added to the RTO price (220K) for the garage?



You hear a lot about what additions add value to a house, but I've never seen much discussion as to what value a garage adds.



Thanks



Tris

 

[Sherilynn]

Depends on the place. In Fort Mac, a garage costs a little more than in Edmonton, but the property value increases by at least 2 times the cost of the garage. In Edmonton, I would guess that the added value is not a whole lot more than the cost.



Either way, you are getting your money back plus more. If the cashflow looks good in the meantime, then why not?

 

[Thomas Beyer]

People buy houses without a garage these days ?



Last time I checked it snows a lot in most parts of Canada.



It is an absolutely essential feature of a house, unless you are on the Left Coast.



So yes, for 22,000 go for it, but you will get somewhat less for the house if it is already leased to someone else. So you trade property value and RTO tenant-buyer quality for additional cash-flow. I would find it weird to rent a house with the intention of buying it when the garage is leased.



On the other hand, that allows you to lower the rent you ask by perhaps $250 and as such get more of an option premium making the sale easier down the road, as qualifying the TB in 2 to 3 years is the most critical aspect, but if he has now accumulated a decent cushion it will become easier to qualify for a mortgage with more down.



So, yes, all things considered, I'd get him to build the garage and rent it to him.