{"id":1206,"date":"2013-09-16T23:51:57","date_gmt":"2013-09-17T04:51:57","guid":{"rendered":"http:\/\/www.holypotato.net\/?p=1206"},"modified":"2013-12-03T23:35:20","modified_gmt":"2013-12-04T04:35:20","slug":"mortgage-helpers-not-magic","status":"publish","type":"post","link":"https:\/\/www.holypotato.net\/?p=1206","title":{"rendered":"Mortgage Helpers: Not Magic"},"content":{"rendered":"

Rob Carrick posted about a Toronto family frustrated by the high cost of housing<\/a> and wondering what to do. There were over 100 responses from the community: some suggested renting, some moving away to more affordable cities, others accused them of being spoiled and entitled for thinking that a house in Toronto should be anything other than a crushing financial burden. About 10% of responses said that they should buy a house with a basement suite (“mortgage helper”), and that renting it out would solve all their affordability concerns.<\/p>\n

Some quick math for all those who think “just get a place with a mortgage helper” is somehow a magic solution.<\/p>\n

Assume they can rent out the basement for about $1000\/mo inclusive. There are some added insurance and utilities costs, so say the real gross is $800\/mo. Apply some reasonable rate of return — say an 8% gross yield, which might work out to a 4-5% cap rate — and that $800\/mo income basically means that they can buy $120,000 more house than they would otherwise. So the $700,000 house they were looking at would effectively “only” cost them $580,000 — yet they’d have to deal with tenants in the basement, lose out on a 2nd or 3rd washroom, all the storage space, a ready play room for the kids, and quite likely share their parking and back yard. In other words, they lose a good portion of the benefits of paying up to get a detached house in the first place, without the lower cost of a true attached property. <\/p>\n

Plus, the prevalence of this analysis-free HGTV presents Income Property<\/em>-type thinking means that the house with a basement apartment roughed in usually costs more <\/em>than the comparable true SFH in the first place! All those risks and drawbacks, in the end to only be a few hundred dollars per month ahead, if any at all. I don’t know how “mortgage helper is axiomatically good” became such a prevalent meme*, but playing amateur landlord to the basement-dwelling crowd** is not the solution to a young family pressured by high house prices.<\/p>\n

* – though we can guess: most people probably think that the suites build and maintain themselves, with no additional cost, that the full $1000 cheque comes every month without default or vacancy, and that it is entirely profit because accounting is hard.
\n** – no offense intended towards basement-dwellers, who are 96% of my readership.<\/small><\/p>\n","protected":false},"excerpt":{"rendered":"

Rob Carrick posted about a Toronto family frustrated by the high cost of housing and wondering what to do. There were over 100 responses from the community: some suggested renting, some moving away to more affordable cities, others accused them of being spoiled and entitled for thinking that a house in Toronto should be anything […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"_links":{"self":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts\/1206"}],"collection":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1206"}],"version-history":[{"count":0,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts\/1206\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1206"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1206"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1206"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}