$ 300,000 LaneWay house ???
“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.”
“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
Another looming disaster.
Adding a detached living unit on the same property as a Single Family Home effectively makes it a duplex..it is no longer Single Family Housing.
I foresee (2) scenarios:
Scenario (i) is having an older home say 40+ years old and deciding to add a laneway home. Lets presume that it will cost $300,000 . However, if you sell, in all likelihood the majority of potential buyers would wish to build a new home . Your existing home is worth ” lot value “. ( For sake of argument lets say Lot = worth $1,000,000 . Hence the total price would be $1,300,000 ).
Scenario (ii) is having a relatively new home and then building a laneway home. Lets assume the newer home was worth ( or you paid ) say $2 Million. Then you add a $300,000 LaneWay home. Now you are into it for a total of $2,300,000.
In either scenario , the seller has expectations that they will not only recover $300,000 but also that the laneway house will be selling point.
Will this pan- out ? If the market continues to drop, the owner has to chase the market down, and that $300,000 added cost may end up a greater liability.
IMHO, they have effectively limited their pool of BUYERS. First of all, at the time of sale, there may be an existing tenant, which has its own set of issues insofar as eviction notice or ____ ? Optimistically the tenancy would carry over….but then again, the new owner may demand vacancy.
Simply put yourself in the Buyers shoes. Would you want to buy a property with a laneway home ?
Me? I ” might “….IF having one was part of my long term plans, …..and it was well built and properly situated and thus saved me from all the hassle of trying to build it myself.
However, my guess is that the demographics are that such parties that pursue this laneway housing option are likely long time owners that have paid off their homes years ago and simply want more income. I highly doubt a party that wishes to buy a lot and build a new home would want a laneway home….your lot already allows for a large home , likely 5,000 to 6000 sq.ft. which will take of a large chunk of the lot ? Does anyone really want to use up what’s left of their back yard their with a small house? In addition , what will happen is that one back yard view will become cluttered and clustered… it will look like 3rd world village when one looks Left, Right and across the Alley. It would be far cheaper to create a mortgage helper inside the McMansion. Then again, the LaneWay Housing may compete for renters that find a cheaper option inside what I predict will be a massive transition of turning McMansions into rooming houses.
Hence, the savvy buyer may avoid areas that have LanewWay Homes…..or any lanes period.
In Richmond: They had (3) designated neighbourhoods surveyed if they wanted LaneWay Housing. One well organized neighbourhood in Central Richmond said NO. However, as per usual , the City’s modus – operandi has been to have a pre – arranged agenda….and then submit surveys to targetted areas. It ends up like a negative billing option…if there is not enough resistance….the City agenda moves forward to approval. This assessment year should be interesting, as some LanewayHomes are being built in the Shellmont area. These non resistant property owners “suckers” will ultimately see higher assessments, given their properties now have a higher and better use, and thus higher taxes EVEN IF THEY NEVER BUILD A LANEWAY HOUSE.
Thus, IMHO, the laneway homes agenda is simply to increase property tax revenue and a looming nightmare for those that actually own and live in those neighbourhoods