A guest house is one of the most popular ways of upgrading your home (and income) to the next level. Also known as a Secondary Dwelling Unit (SDU), it can be an investment and solution to house some family members or tenants to help pay your mortgage. However, building a secondary suite in your home can come with its fair share of obstacles and questions. From costs and red tape to legalities and insurance, we’ve got all of the information you need when it comes to Secondary Dwelling Units.
Can I put a secondary suite on my property?
Yes, you can, but you must meet the proper qualifications. Furthermore, there are building permits to acquire and Building Code requirements you must follow.
Can I convert an existing unit on my property into a Secondary Dwelling Unit?
Yes! You can convert an existing unit into a guesthouse. However, it isn’t as easy as simply starting the construction immediately. Not only do you need to first get permission from the city, but you need to assess your property and make sure it is suitable for a secondary dwelling unit. Remember, these units have to be able to have their own running water, electricity and heating. Depending on whether you want your secondary suite to be attached or not, it may take some time to get approval. For more in-depth information, check out our article on how to add a guesthouse to your property.
Can I rent or sell my guesthouse?
Renting a guesthouse is a very popular method of making some extra cash. The money spent building the secondary suite will most likely be made back quickly with the money made from renting it. However, you cannot sell your SDU as a standalone property. If you want to sell your guest house, you will have to sell your primary residence along with it. The same property means both dwellings are bought/sold together! An alternative decision may be to rent out both your main home and the guest suite for extra income, when possible.
Will my secondary dwelling unit increase the value of my home?
Generally, the addition of a secondary suite will increase the value of your property. Not only will it up the price, but it will also attract more buyers to the property. Why? Because they’ll have a built-in investment opportunity if they choose. With this being said, this method isn’t necessarily for everyone. If you plan on selling your home immediately after building a guesthouse, you should work with a real estate agent to find out if this is the right move. You’ll be able to gauge if it will attract the right buyers, and if it’s a good move for the neighbourhood you are in.
What happens to my tenants if I sell the main property that the guesthouse is built on?
The legalities of what happens to your tenants can be tricky to decipher. Generally, this will depend solely on whether or not the new owner has the intention of continuing to rent out the guest home. They must continue to obey the rules of the Landlord and Tenant Board.
However, if you are still under the first term of your lease, the landlord must honour the lease until its end. When the landlord intends to make a sale, a 60-day notice is a requirement from the start of the month. If the buyer chooses to no longer rent the property out, they must wait until the end of the lease period to take over the property.
How much will a secondary suite cost?
Similar to building a house, the price of your secondary dwelling unit will depend on a variety of factors. Converting an existing, detached space, such as a garage, will often cost upwards of $150,000. Again, this can be lower or higher depending on the amenities you choose.
Where you live can also greatly impact the building costs of your guest house. Various locations within the province may have different permits and fees.
Can you build a guesthouse in your backyard?
Yes! A guesthouse can be built in your backyard. These secondary suites were made completely legal back in the summer of 2022. However, this typically comes with obstacles. As with any type of guest home, you will need to ensure your secondary unit obeys the building codes and any by-laws in your area. This includes maximum building height and width. As always, you’ll also have to apply for a building permit and secure adequate insurance coverage. Contact your isure broker to discuss insurance coverage for your secondary dwelling unit!
Is an Airbnb the same as a guesthouse?
The difference between an Airbnb and a guesthouse is minimal, but there are differences nonetheless. An Airbnb is a place that is rented out, generally for a shorter period. This can include an entire secondary unit or simply, a spare bedroom in your home.
A secondary dwelling unit, on the other hand, is usually a more permanent stay for longer periods. A guesthouse will also have a secondary kitchen and bathroom that is separate from those in the main property. With this being said, you can always rent out your guesthouse on sites such as Airbnb. However, people will generally rent them for longer periods to obtain more income.
Where can I list or find an SDU to rent?
Sites, such as Airbnb, are perfect if you want to rent out your secondary unit for a short time! However, if you want to find or list an SDU for longer terms, there are many realtor sites to consider, such as housesigma.com, realtor.ca, or even kijiji.ca!
Additionally, sites such as Zumper.com, Liv.rent, and rentseeker.ca are all great resources. Duuo.ca has a terrific list of the most popular rental sites in Toronto.
What types of amenities should a secondary suite have?
The types of amenities you’d like to add to your guesthouse are completely up to you! However, a few things are mandatory to classify (and rent it) as a guesthouse legally. These amenities include a separate kitchen, bathroom, bedroom and heating. If your unit fails to have any of these, you can run into some legal trouble that may delay you renting it out.
Other optional amenities include air conditioning or a washing machine and dryer. However, the absence of these items will likely deter many tenants from wanting to rent.
Does my guest home require additional parking space?
Not necessarily. Generally speaking, you are not required to have an additional parking space for a tenant(s) renting out your secondary dwelling unit. In many cities, such as Toronto, a lot of single-unit homes don’t even come with parking spaces, and require you to buy a pass from the city to be able to park on the road. If your driveway does not have the extra room, or if you don’t have a driveway at all, buying a parking pass may be the only option for tenants.
Can my children legally live in a guesthouse on my property?
As long as your children are of age to live on their own, they can legally live in the guesthouse on your property.
Am I legally required to charge rent for my guesthouse if I am renting to family members?
You are not legally required to charge rent for a guest home on your property if you are renting to a family member, although situations may vary. It is quite often that guesthouses are built for family members who have retired or for those who can’t afford a property. With that being said, the guest house will require proper insurance coverage before having family members stay there.
Do I need to tell my insurer that I’m building/renting a secondary dwelling on my property?
Yes! You should always be transparent with your insurer. As soon as you begin this project, it’s best to let your insurer know that you will be building or renting a secondary dwelling on your property. More often than not, many people fail to do so. This is due to fear of having to pay more money for their home insurance coverage. However, this can be tricky if you need to file a claim based on damages or an incident on your rental property. Furthermore, this will likely void your policy if your insurer wasn’t made aware of the rental property in the first place. Remember to check out our article on How to add a guesthouse to your property for more information on this topic!
Remember, whether you are thinking of building a guesthouse or are curious to know what your home insurance policy covers, have isure review your policy with you. Contact us or request a quote today!
