An Update On Garden Suites In Toronto & Why It’s Important For You As A Real Estate Investor!

An Update On Garden Suites In Toronto & Why It's Important For You As A Real Estate Investor!

Introduction

Our population is growing in Toronto, and in the past, new construction has been primarily focused on the condo market. So, density in high rises has been trending up, and density in low rises has been trending down, especially with an ageing population in low-rise homes. 

Because of this imbalance, Toronto is now focusing more attention on building up density in low-rise areas. Recently, policies are loosening up to allow for an increasing number of units in houses, like secondary suites and laneway suites. This new potential to increase rentable space has opened up a lot more opportunities for real estate investors, which is why houses are now attracting much more attention and appreciating at a very fast clip in recent years.

The latest initiative that our city has been working on is garden suites, and in this video, I’ll share the latest updates on what’s happening with garden suites, why you should care about garden suites as a real estate investor in Toronto, and what you should look out for if you’re looking for real estate with garden suite potential.

Timeline Of Garden Suites In Toronto

Here’s the timeline that garden suites have been through, and the discussions started in late 2020 with the garden suite preliminary report. Last year, things moved quickly with draft by-laws created and approved, and in February of this year, 2022, garden suites were finally given the green light to go ahead. 

All was setup and ready for March, but we’ve now reached a bit of a hiccup. Normally, before by-laws come into place, there’s a period for appeals, but this has to come from the Minister of Municipal Affairs. Now an appeal has happened, but not from the Minister but from a group of residential associations. 

Note that this has already been deemed invalid, but unfortunately, the Ontario Land Tribunal still has to go through the processing of the appeal before it can be dismissed. So right now, we’re looking at a delayed timeline of around 6 to 8 months before ratification actually happens. Having said this, garden suites will be happening soon, and now it’s just a matter of time.

Why Do Garden Suites Make Sense?

Since there’s now a delay, perhaps it helps you buy time to really understand more about garden suites and why you should care about them as a real estate investor. Instead of needing a laneway to build a house in your property’s backyard, garden suites allow you to build a house as long as you have enough space in your backyard. 

These houses are intended to be just like laneway houses; they aren’t severable from the main house, and utilities are set up so they are connected to the main house. Because of our housing crisis, the purpose is, simply put, to provide extra housing in our city, either for multi-generational living or rental purposes. As a real estate investor, you’re probably most interested in the latter, so let’s quickly go over why it makes sense. 

Right now, it costs approximately $250 to $400 per square foot to build a 2-bedroom rental grade garden suite, plus design and permit fees. So after the project is done, you’re looking at an approximate out-of-pocket cost of $300,000 to $450,000. After it’s done, conservatively speaking, you can rent out the 2-bed house for a similar price to a 2-bedroom condo, but the cost of getting it is significantly less than a 2-bedroom condo in Toronto today. So, from purely a rent yield standpoint, it’s already a good idea.

In terms of market appreciation, I’d expect it to be worth at least how much you paid for it, and appreciate at a similar rate compared to average Toronto real estate, just like how a bigger house is always worth more, but appreciates at a similar rate compared to a smaller house on a similar sized lot. 

The value-added side is where things get a bit fuzzier. Since these structures are extremely new, there are not many market comps out there. I’d expect that because you put in sweat equity to complete the building project, there should be a decent level of value-added appreciation, especially when you value it based on cap rates.

What To Look Out For If You're Looking To Buy A Property With Garden Suite Potential

Now, if you’re ready to start looking for properties with garden suite potential, what should you look out for? For those of you who are familiar with laneway suites, I’ll also try to put it into perspective by comparing laneway suites with garden suites. I’d say the four pillars to take note of are fire, parking, trees, and size. 

First of all, fire. Because the house is in the backyard, you’ll need to make sure it is fire-accessible and close enough to fire hydrants. In a garden suite, the entrance of your house needs to be a maximum of 45m from the main road, and then another 45m to the fire hydrant.

This is a stricter fire requirement compared to a laneway suite, where you can be 90m from the main road and then another 45m to the fire hydrant. You also need to make sure there’s enough room for the crews to get through between houses. In garden suites, you’re looking at a 1 m distance from your neighbours, whereas laneway suites are slightly less at 0.9 m. 

Next, parking. Although you don’t need any parking for the garden suite, you will need to maintain parking requirements for the main house. In Toronto, a two-unit main house will most likely require one parking spot.So, this is stricter than laneway houses, where there are no parking requirements.

Trees, or the lack thereof, are pretty important to garden suites. For laneway houses, they are a bit more lenient with a healthy tree removal program, but we were informed that this is not happening with garden suites, so a big tree over 30 cm in diameter in the middle of a backyard will be a dealbreaker. 

When it comes to size, garden suite requirements are different, but not necessarily better or worse. If you have a lot that’s too narrow and too short, garden suites can be a no-go. Generally speaking, the maximum width of a garden suite is 80% of your frontage. This is different from laneway suites, where you can build all the way from end to end. So, with the same size frontage, lots with laneways could be workable, but lots without them might not be.

There’s rear setback and distance to main house requirements, but laneway and garden suite requirements aren’t too different, so I’ll focus on where things get a bit more interesting. With a laneway suite, you can build up to a maximum depth of 10 m and a width of 8 m. In a garden suite, the maximum footprint isn’t measured in length and width but rather a maximum area requirement of 645 square feet.

And then we have the landscaping rules. Laneway suites require 85% of the area between the houses to be soft landscaping, whereas garden suites are probably more forgiving, requiring 50% of the rear yard as soft landscaping. What this means is that garden suites can end up being more flexible in terms of where you put them in the backyard, and you can definitely get more creative and come up with interesting building structures in long and narrow lots. 

Of course, there’s so much more to the by-laws and requirements, and this is just my attempt to summarise my top things to note for garden suites. If you’re looking to dive into the exact requirements for garden suites or laneway houses, I recommend that you review the by-laws and contact planners and designers who would be able to better help you navigate this side of things.

Key Differences Between Laneway Suites & Garden Suites In Toronto

How We Can Help

If you’re looking to buy an investment property with garden suite potential, our real estate sales brokerage would be happy to chat. These days, we’re seeing a more buyer-friendly environment and there are some great opportunities on the market that can work well if you’re looking to build garden suites too, once the by-laws are ratified. 

By putting in a garden suite, you’ll maximise the property value of your property. And from an investment standpoint, this means maximising your returns and specifically your rental income, which is great for your debt servicing ratios. If you’re looking to further grow your real estate portfolio, all of these things will help you qualify for new mortgages faster.

We’re big believers in investing in freehold houses in Toronto, and if you want to chat more about this, we’re ready for you! We can look at your requirements and preferences and then match you up with the best investment property that fits your needs. After we help you buy it, our team also provides renovation guidance, leasing and property management if you need it. Just connect with us if you want to learn more about our services.

Want To Get Started With Real Estate Investing In Toronto?

We’d be happy to learn more about your situation and help you find the best investment opportunities for you.