Why 2nd Suites Do Well In Both Up & Down Markets

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You've heard me go on about why homes with second suites do well in hot real estate markets. In case it's not obvious, the demand is a result of eroding affordability causing many people, even middle-income earners, not being able to purchase or rent an entire home. Therefore, a single suite is a viable option, with many demanding higher quality units.

At the same time, we are experiencing a massive increase in population density in all major cities and towns, all while the official policy from  governments is to intensify our existing urban areas. More fuel to the fire.

Now for the non-obvious part. Second suites also do well in a slow real estate market. In Canada, there's no better example of that than the province of Alberta. The past few years have been quite tumultuous for owners of real estate because of oil's collapse.

When things were hot back in the early twenty teens, a building frenzy (especially in Calgary and Edmonton) resulted in a glut of homes being built, including many condo units and single family homes way out of the city boundaries. Prices are still depressed and many units unsold.

The tune is different however for multiple income producing homes. I've spent the past week here speaking with Realtors, contractors, architects and investors. And all have told me the same thing: A single family home with a well built second suite, that has access to good transit, community amenities, schools, and shopping is still in extremely high demand, often still demanding multiple offers.

Why Is That?

There's probably a host of reasons, but I suspect that one of the main reasons is that there is still a huge number of people moving into these cities every year. Many of them are not in the position to buy a condo or a single family house, and so renting a suite is still an option for them.

See Calgary census shows growing population, big turnaround in migration

Additionally, suites in a home has many advantages, such as tenants with kids having access to certain schools, which is not as available to those living in condo or rental apartments.

2-unit homes obviously collect much higher rent, and so the cash flow is very appealing to investors interested in a turn-key product. Moreover, suites become a great “mortgage helper” for many regular owner occupiers.

What Does This Mean For You?

I consider Alberta to be the "canary in the coal mine" for what happens to real estate when things go south. And yes, it can go south in a hurry. So you can hide under the covers and avoiding doing anything, or you can take action in a smart manner, and mitigate risk as much as possible.

That's why if you're going to invest, you might as well do it in a way that keeps you most insulated from macro-economic changes that are outside of your control. This means investing in single family starter homes with the ability to add in additional units, and possibly even further intensification later on, such as adding in extra floors or even severing land and building.

Even without the extreme example of Alberta, we've experienced a bit of it here in Ontario as well since mid 2017, with our own little correction. Since then, I've seen my business ramp up, and an even greater demand for these homes.

This is exactly the reason why I personally am invested in homes with legal second suites, and encourage those in my network to do the same.

Investing in Alberta

The sentiment for Alberta in my discussions seems to be that of cautious optimism in the overall market. Things have bounced back slightly since the lows of a couple of years ago, but there's still a long way to go. If that's a place you're interested in investing in, now may be an interesting opportunity.

The purpose of my trip was to meet and connect with various professionals in the industry that provides services related to second suites, that can do a good job. It was a successful trip, and I'm happy to say that we will have the right people in place over there if you were to ever be interested in investing.

  Yes it's early October in Calgary and that's snow on my friend's lawn and roof

Yes it's early October in Calgary and that's snow on my friend's lawn and roof