One of the greatest things about them is the foundational footprint they create in the basement for an accessory apartment.
The reason most people search for bungalows, as opposed to two-storey homes, when considering creating an accessory apartment is the fact that with a bungalow the square footage is spread out over one floor creating a much larger basement, whereas with a two story home the above ground floor space is stacked on top of itself resulting in a much smaller basement to work with.
Bungalows are also sought after because of the lot size and the ability to have a doublewide driveway – a necessity in the City of Guelph when registering an accessory apartment. You can generally expect a 1200 square foot bungalow to be on a lot of at least 50 feet or more, whereas with a 1200 square foot two-storey home you’re typically looking at closer to a 30 foot lot which leaves no room for the double wide drive.
Of course, you will also require the ever-so-popular separate entrance feature that everyone is looking for. As soon as people hear the words bungalow and separate entrance used together, you can almost see the gears spinning in their head as to whether or not creating an accessory apartment will work. Cost wise, this is likely the most important factor to consider when looking for these types of conversions as it would likely be the most costly to replicate if one weren’t already existing. Finding a home that has this feature already there is a huge bonus as compared to working with a home that does not.
Now, when you’re looking for a property with the end goal of it being a duplex, there are two basic options you can look for:
The first option is to find a bungalow that is already set up to be used as a duplex and already has most or all of the requirements the City needs to register it legally. If you’re patient, you can find bungalows that have been already set up this way, which the owners were afraid or unwilling to contact the City and inform them that they had an unregistered accessory apartment operating in their basement. For a few thousand dollars you can drastically increase the value of the home by purchasing it, possibly making a few changes, and then going to the City and registering the accessory apartment. Personally, I place a value of at least $20,000 on having a registered accessory apartment within the City of Guelph. If you find the right property, the repairs and registration with the City can cost a lot less than the value they add.
The second option is to find a bungalow with a separate entrance and an unfinished or out-dated basement, gut it and start fresh. This option requires a lot more experience, knowledge, or at least an extreme willingness to learn about all the different trades required to complete an accessory apartment and the ability do the work yourself. Depending on the amount of work that needs to be done, and whether or not you are doing it yourself or hiring out contractors, you can generally put in an accessory apartment in the basement for around $40,000. Of course, with renovations there is always what you will expect to pay and what you will end up paying, and those two numbers can be quite far off from one another, so be prepared to spend over what you expect to complete the task, if you must.
Whichever route you decide, the beauty here is that, as an investor, you can take a home that would generally bring in around $1200 per month and almost double it’s revenue by simply making better use of the basement space and creating a legal accessory apartment. In some cases you can even make it a nice 2-bedroom unit that will generally bring in close to $1000 per month. You would then have roughly $2200 per month coming in from the home, which should be enough to cover your expenses.
The price of an average bungalow in Guelph has dramatically risen in the past couple of years however. Perhaps investors are catching onto this strategy of converting bungalows into duplexes and, in turn, have jacked up the demand for such properties. Regardless of the latest price increases, I still think it’s a very profitable venture for someone who is willing to make the effort.
If you are going with the gut-and-start-fresh route, you may want to consider signing your mortgage for a one-year term while you complete the renovations. Once that one year is up you can then approach the bank about having it’s value reassessed and likely reclaim some of the cash you invested into the renovations by mortgaging the newly appraised value of the property and taking back a pay out from the bank, while avoiding the hefty discharge fees associated with breaking a longer-term mortgage.
Another product some lenders offer is a “purchase and repair” type mortgage, which basically allows you to borrow on the current value of the home with additional funds being granted to you for the renovations you propose. This allows you to access more funds up front for the renovations and use less of your own cash to complete the project.
Needless to say, there are many things to consider when approaching this type of investment and many rules around compliance with City bylaws, which must be adhered to in order for the City of Guelph to allow the apartment to be registered. One of the key things when purchasing this kind of investment is to have someone in your corner who understands all the complexities and rules around creating a legal accessory apartment within the City of Guelph, and also someone who understands Guelph’s rental and housing market.
For anyone willing to stick to their plan and see this type of investment strategy through, the rewards can be quite satisfying.
Until next time, Happy Investing!