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!