To Suite or Not to Suite? (Calgary Market)

[Aneil Rajaram]

Hi All, 

First-time poster here. I'm pretty new to the world of renting, but have passively been reading about it and have hopes to have a portfolio one day. I currently own a condo, and am now looking forward to my next property. 

Background: I'm looking for some real-time advice on what to do with a property we just purchased. We purchased a roughly 1000sqFt house and had plans to add a kitchen, door separating the upstairs and downstairs, and other elements to the basement to suite it. Roughly looking at $20k to do enough to have an illegal suite, and $40K to legalize it.

Unfortunately, we were unable to include these costs in the mortgage because during the conditions period our bank's insurance would only give us $20K, for a $40K job as estimated by a contractor (due to a low appraisal in order to slow the Calgary housing boom.. is what we were told). After a lot of back and forth between the bank, our mortgage broker, and the contractor we felt we wouldn't have the project completed in time, or have the permits and legalization in place to receive the funding from the bank. 

Debate: So what should we do now?

Option 1:Live in the whole house

• -We absolutely love the house and it has lots of wonderful features and upgrades, as well as the basement is completely finished and is beautiful. Based on our budget we can afford to live in the whole house without a renter and will be paying similar to what we were paying in our previous condo (mortgage + condo fee). 
• -We bought the house off-market, and are confident that we got the house for roughly $20K undervalue so we're very happy with the purchase and feel lucky to have it as a property. That said paying the full house mortgage will slow down our time to the next purchase and we were hoping to have a house hack set up. 

Option 2: Suite the basement 

• -We could move forward with the plans we've outlined with our contractor and suite the basement as either a legal ($40K), or illegal suite ($20k). We estimate that we'd be able to rent the basement out for roughly $1000 per month, which would mean we'd recoup $12k in the first year. 
  -To fund the project we'd either have to use our own money, OR look into using a line of credit or home improvement loan which will be at a higher interest rate than our mortgage. 

Option 3: Add a wet bar 

• - The in-between option is we add a wetbar to the basement and a few inexpensive upgrades and then request permits from the city in hope that we won't have to undertake a bigger project in order to legalize the basement and save some money and reassess. 
  
  

Ultimately we were a bit handcuffed in that we only had the 7 day window in the condition period to make all these decisions, and now we're trying to plan what to do before possession. 

Any advice, resources or personal stories would be much appreciated! And go easy on us, we don't know what we don't know! 

Thanks! 

Aneil