Real Estate Talks

I have been noticing a lot more laneway houses in the last couple years throughout Vancouver (especially on the East side).
It is relatively cheap to build roughly $300K or less total for ~700sqft rental on a stardard 33x122 lot that you can rent out for $1500 + depending on location.

But what I am really debating is whether it is worth it (financially) to build one at your yard?
1. You are potentially losing your 1 if not 2 parking spot for your exisitng garage
2. You are paying more property taxes because value of your building will go up in your next assessment
3. I am not sure if the overall value of your SFH will increase by more than the $300K cost you put up front to build it ? Maybe?
4. When you sell your property, the laneway will count as a investment property so you will pay capital gain tax on it vs. taking the entire profit of the sale, tax-free, if you don't have a laneway (biggest concern).
- Currently, you can't sell the laneway separately but this could change in the future.
For example:
You've made a capital gain of 100K on your house at the time of the sale, you would pocket the $100K tax free if the entire property (without laneway) is your primary residence.
But, say you have a laneway and it takes up 30% of land for simplicity-sake. WHen you sell the entire property, 30% of the $100K will the capital gain of your laneway (ie: $30K). Half of that gain ($15K) will be subjected to capital gain tax.

So overall, I am not sure if building a laneway is a clear winner/beneficial to home owners. What do you guys think? Is it worthwhile to build it today and earn a stable monthly rental income but risks losing a portion of that capital gain you've made of your house since the laneway house will be taking a portion of that away from a capital gain tax? Or am I just over-analyzing?

Thanks for looking. Any feedback are welcome!

You can buy 1 bedroom condo now, in a highrise, 600sf, almost new, great mountain, water, park, and city view, at 330K in NW, and rent it for $1650/m.

So, 300k for a Laneway house is too expensive for me, not worth it...half of that price will be a different story, oh well that's my 2 cents.

You can buy 1 bedroom condo now, in a highrise, 600sf, almost new, great mountain, water, park, and city view, at 330K in NW, and rent it for $1650/m.

So, 300k for a Laneway house is too expensive for me, not worth it...half of that price will be a different story, oh well that's my 2 cents.

Ya you have a point there but I feel there is a lot more recurring costs to owning a condo (ie strata fees, higher property tax). I am just not sure how much NW condos can appreciate still but a lot of us have been wrong for the last decade or so
To me, I see a future where the city allows the laneway to be sold separately which could turn this 300K into 600K+ easily but that's only a guess.

If one can afford the laneway home, might as well build it for the value it creates

I'm not that big of a fan of laneways unless you are also building the primary house at the same time, and are looking to sell. The economy of scales of utilities hook-ups, labour, permits, and materials will be spread across a much larger project and the laneway will give potential buyers more future income to borrow against.

Having said that, I do know people who have built a laneway while living in the main house and are happy with the additional income (AirBnB).

Noisy

When you sell your property, the laneway will count as a investment property so you will pay capital gain tax on it vs. taking the entire profit of the sale, tax-free, if you don't have a laneway (biggest concern).

Really? You only pay cap gains tax if you claim specific costs on your return. Maybe an accountant can clarify but I think in general people building lwhs on their primary are not subject to cgt

you can rent out up to something like half your house and still claim it as tax free when you sell

you can rent out up to something like half your house and still claim it as tax free when you sell

You can do way more than that. People live in basements or Laneways and rent out the main house. Cap tax exempt provided you don't claim CCA and a few other minor details. True story.

I am not sure if building a laneway is a clear winner/beneficial to home owners. What do you guys think?

My opinion, based on those I have talked to is that lwhs are probably not worth it if you're building with an existing main structure already there, but is better if it's built alongside the main since you leverage fixed costs. I don't think it adds much to the value overall. But che k out guys like @lanefab on Twitter and ask questions. They will know more than anyone here.

you can rent out up to something like half your house and still claim it as tax free when you sell

You can do way more than that. People live in basements or Laneways and rent out the main house. Cap tax exempt provided you don't claim CCA and a few other minor details. True story.

I am not certain either but from what I've read, the LWH count as your investment property and not your primary residence (unless you or your spouse or family member moved there). Therefore, it won't have that primary residence exemption where you can sell it without paying capital gain tax.
See here: https://www.bellalliance.ca/laneway-hou ... he-tax-man
I certainly hope this is false info

Cap tax exempt provided you don't claim CCA and a few other minor details. True story.

It is true, but that's a big proviso.

A few people have built a lane way house in my neighbourhood (Renfrew heights) with old houses.

I always thought of having one #1 keep and eye on the renter vs condo, #2 House parents in the future

The info is not necessarily false, but dude has an incentive to get you to seek "professional advice". Pay a few 100 to a tax lawyer to be sure, but not claiming CCA is imperative, be sure there's nothing else you're missing though. CRA hates the way the courts have ruled on principal residence exemptions so their official policy may not align with what is legal. All the advice online is very carefully worded about citing what CRA " deems", but is silent on the legal precedent, of which none I am aware wrt laneway houses specifically.

http://www.rebgv.org/what-are-tax-impli ... eway-house

Hi

I read your post on Laneway homes. I'm a reputable builder and I
construct single family homes in Burnaby. The costs that you have been
quoted for laneway homes is considerably less than 300k. I would put the
cost at 100 to 150k depending on how you wanted it finished. Build time
would be a 3 months tops. However getting your permit from the city, that's a totally different topic!

If you have more questions feel free to drop me a line