“I never bring up the subject of RE with friends, but they always just volunteer this stuff. However today at lunch, my friend who lives on the westside said he just accepted terms with a contractor to build him a $300,000 laneway house at the back of his lot. 2 stories, 700 square feet.
I asked him how much he thought he could rent it out for and he said about $2000/month. I guess on paper that is sort of a 10% net return if you don’t consider the $1.7 million it cost to buy his house in the first place. Although I kind of wonder who would want to pay $2K/month to live in a shoebox in an alley, westside or not.
Also the contract is not fixed price, so if costs go over (like if it rains and lengthens the period of construction … and sometimes in January it does rain here) maybe the house ends up costing $350K-$400K. Seems like an odd thing to spend more than 2x the average US home price on a bunky in Vancouver.”
Owners building laneway houses aren’t factoring in the market value of the land, which makes the price:rent math even worse. – vreaa
Further: People deceive themselves into thinking that they own a SFH in a desirable area of a desirable city, but they actually end up amateur landlords, running a rooming house with tenants in their basement and garage. [This applies to basement suites as much as it does to laneway houses].
That self-deception has been one of the bubble subplots; one of the mechanisms that have driven prices to artificial heights.
When folks sign the papers for these purchases (for which they have overextended themselves cruelly), they’re not thinking about the landlord math, they’re lost in the fantasy of SFH ownership. – vreaa
Prior related posts of possible interest:
“What’s the Difference Between A Shed And A ‘Laneway House’?” [Drum-roll] “About $268,000!” [Cymbal]
VREAA 29 May 2012
Basement Suite In East Vancouver Sells For $590K
VREAA 24 Feb 2012