Legal Secondary Suites – What You NEED to Know
Calvin Hexter
Hello, everybody, Happy Wednesday. hope everybody’s having a chilly day. It is freezing outside. I think I’ve done like 12 showings today and every single one I was like “brrrr” getting up to the house. And no stranger to the cold is my guest today. So as you guys know, I’m Calvin with Calvin Realty. We are an investor focused team that also focuses on primary homes. And today my guest is going to be Mark McLeod with ONMARK Contracting. Mark, let’s go ahead and get you in here. Mark, what is going on?
Mark McLeod
Oh, good, good. Freezing, but looking forward to the weather next couple days.
Calvin Hexter
So fun fact about Mark. Mark, this is your very first live, you’ve done so far.
Mark McLeod
Yeah. So bear with me, I’ll do the best I can.
Calvin Hexter
So today we’re gonna be talking about legal secondary suites. And the reason why I’ve asked you to come on specifically, is that we’ve done lots of projects together worked with numerous different investors. I mean, last year alone, 2021 probably almost like a million dollars worth of renovations, potentially with with secondary suites. I mean, between duplexes, single family homes, probably even maybe more. I mean, what do you think you’ve done? Like, I know, I’m putting you on the spot, but it’s fun to do that way! What do you think you did in business last year, just for secondary suites? Do you think it was like, a million?
Mark McLeod
No, not not quite. I mean, I think we had a little bit of held up on shipments and stuff, right. So there’s been a few things that have kind of delayed the process. But I think we did about $560/$570k last year, worth of renovation projects. So not a million, but we’re getting up there, I think this year is going to be a big change. There seems to be a lot more things happening. There’s more investors, there’s more… just everything happening. So it’ll be good.
Calvin Hexter
Yeah, definitely. Okay, legal secondary suites versus non or mother in law suites. So I get the question all the time, you know, what’s the difference and so on. So legal secondary suites is essentially you’ve gone through the city and the city has approved almost every step of the way. You’ve done the development permit, you had, you know, the electrical, the plumbing, the HVAC, you have your final building permit, you essentially have all these permits, and the cities come by and given you a green sticker (you hope a green sticker). ONMARK, you should actually change your name to “Green Sticker Construction”.
Mark McLeod
I’ll work on that.
Calvin Hexter
So you’re looking for the green stickers. And at the very end of it all, you get this white sticker. And it says legal secondary suite, occupancy permits, something along those lines, and then you have like a little initial from the building inspector. So I mean, biggest difference between legal and Mother-in-law would be one is permitted, ones not. I mean, you can rent out both, I still think about 90% of the suites in Edmonton are non legal, but going legal, obviously protects you so then you’re not going to be in a position where the city can shut you down, create fines, I think they’ll ask you to remove the entry door to your suite as well as an oven, if you don’t follow their guidelines, and essentially try to shut you down that way. And if you don’t listen, it’s a $1,500 fine. We don’t want to deal with that. Okay, we’re gonna we’re gonna jump right into the questions, okay Mark? So I get a lot of questions, and I work with a ton of investors. What’s the average cost, do you think it would be, to add a legal secondary suite in a single family detached house, we’ll say square footage around 1100?
Mark McLeod
Yeah, right now with with rising costs for a lot of electricians, plumbers, HVAC contractors, and lumber itself, like we’re looking at around, for 1100 square feet, probably $65,000 to $75,000.
Calvin Hexter
And that’s good quality construction? That’s not like low end?
Mark McLeod
No, with that you’re sitting at around the $68 a square foot mark. So, you know, five years ago, we’d probably be doing the same thing for about, say, $45 a square foot, right? So prices have increased, so our numbers need to increase just to cover the cost of paying someone else material cost.
Calvin Hexter
Now, true or false, by adding a legal secondary suite into most homes, does it increase your property value? Drop it or keep it the same? What do you think?
Mark McLeod
I would assume that it would increase it for sure.
Calvin Hexter
Absolutely. So if you’re considering – anybody that’s watching this – is considering putting a legal secretary suite in and Mark has, you know, blown your socks off with $65,000… I mean, there’s a good chance maybe your property value actually increased by $80,000? Maybe $90,000, depending on the community. So I mean, there’s huge opportunity to do value-adds when it comes to your house. Now, let’s talk about why people are doing legal secondary suites. Why are people willing to spend that money to get them in? What do your clients typically do? Because you get to see it from their perspective, you work with a lot of investors, and they’re gonna have certain reasoning of why they’re building these legal secondary suites. What do you normally see? What’s the reason why they would be doing this?
Mark McLeod
You know, I’ve done so many projects with property investors, you know, I think everyone just wants to make their lives better. So I mean, that would be probably one key thing, why anyone would get into doing a secondary suite for a property You’re saving yourself money, you’re having someone to take care of your place. You’re also just generating that income to, you know, get retired that much sooner.
Calvin Hexter
Definitely. Yeah, absolutely. I mean, I deal with it all the time. It’s, you know, you’re looking at subsidizing their expenses. So maybe they want to live. So instead of living, and having to pay a mortgage yourself, utilities, property taxes, insurance, maintenance on the property, maybe you’d like to travel lots, you can have a basement tenant, that can really take care of your maintenance while you’re away in Hawaii for six months every year. That sounds pretty cool. I mean, I do it. That’s why I do do it. I don’t go to Hawaii six months every year, but maybe, you know, maybe next year is a new year for me. But I mean, it helps subsidize your expenses. So if you’re in a position right now, where you’re not secure about your job, you want to diversify your income, you want to make more income… I mean, having a legal secondary suite can definitely be the bridge to help get you to your goals in that sense. I mean, even going for the fact that if you legalize a property that you’re not living in, and you’re not doing that the House hack, right, legalizing a another property and then renting out the main floor in the basement, now you have two rents coming in, as opposed to one, your gross rents are going up, your cash flow is going up. When you have a vacancy, you’re still having one tenant, at least pay the bills, so you’re not having to as an investor. So I mean, the most popular form of investing that I see are definitely the legal secondary suites. And that’s why that’s why I’m stoked to have you on here today and pick your brain a little bit. So lumber kind of sucked last year, didn’t it? I mean, with the rising costs?
Mark McLeod
For sure. Yeah, it’s crazy right now. Actually, you know, I just bought a couple two by fours today. It’s back up to almost $10 A stud. So it went down for, you know, a good four months, three months there. And now it’s gone right back to where it was. So yeah, it’s back to the upwards trend. But I think it has a lot to do with these trucking shipments and whatnot, as well. Right. So we’re, we’re kind of stuck in the middle of it. And we do what we can to keep costs down. Right?
Calvin Hexter
What’s your thought? Do you think it’s gonna go up? Or do you think it’s gonna go down or stay the same for 2022? For everybody that’s watching.
Mark McLeod
Honestly, I think that it’s going to probably be pretty close to what it is right now, for the next couple of months, until everything kind of calms down. I don’t want to get political by any means. But if that kind of calms down a bit, I think it’s all gonna help us in the end, just get back to a normal C type of prices for common materials that we need construction, because they have to realize that they are hurting their consumers, they’re hurting people that want to get into this.
Calvin Hexter
Right? Yeah, yeah. Absolutely. Next question I got for you. I get this question all the time, if you’re coming across a non legal suite or a mother in law suite, what are the typical costs to take a mother in law or non-legal to a legal? I know what’s very property specific? What’s been done and has been done with the estimated cost that you’ve experienced before?
Mark McLeod
Are you going from something that’s already been done to making it legal? Is that what you’re saying?
Calvin Hexter
Yeah, yeah.
Mark McLeod
Okay. Yeah, you know, it’s a catch 22 in that way, because you don’t know what you’re gonna get into, you don’t know how many things that the previous homeowner, or let’s say, they did hire a contractor to do it, they didn’t do things properly… the city is not going to care, they’re going to make sure they go through every bit of it for those three inspections, to make sure that it’s done to the code that we have laid out for us right now. So it really depends, I mean, you can go as, as little as you know, paying HVAC guy and an electrician, and a plumber to come in, take a look at what they know, to make sure they meet code at you know, an hourly rate of $110, give or take, just to get everything back into place. And then, you know, call for those inspections and see that the city is going to make everything work and then check the permits, make sure everything was done properly to begin with. But if you’re looking at a cost, I mean, it could be a couple thousand just to start, really.
Calvin Hexter
Gotcha. Okay, say we walk into a basement suite, and it already has a kitchen and the walls are already sealed and the ceiling sealed, right, not, not not like the T bar. If I’m looking at legalizing a suite, is there a good chance I need to expose the wiring behind the walls? Do I need to take down the ceiling to make sure it’s five eighths? What’s your experience with that?
Mark McLeod
You know, bringing in a qualified contractor just to take a look at the suite is what you want to do to start with. I mean, they’re going to know what they need to do to meet city regulations to make sure those pass right. So yeah, I mean, there’s fire codes that have to be put in place, you have to make sure that the ceiling is done properly. There’s electrical codes, there’s plumbing codes, so you really should have someone to come in, even a property inspector would be fine, but you definitely need that to happen.
Calvin Hexter
Gotcha. Gotcha, gotcha. Next question I got for you is what are some of the biggest challenges that homeowners or investors can face when legalizing?
Mark McLeod
Timelines… insane. I mean, just in order to get into a project, I know that you’re going to be taking to these people to these showings to these houses, they’re going to put in their offers, they’re going to get there, they’re going to get the house that they want, they have ideas on what they want to do. But when it comes to the hardest thing, the hurdle to get over, is just getting everything buttoned up with the city prior to starting anything on your project, you need to make sure that your permits are in place your drawings are done, and you need your cities, you need their approval to get started on the project. So that alone in my experience has taken anywhere from three weeks to eight weeks of just waiting for the city to get behind them. So they can get their their project started. Right. That’s where a lot of frustration comes in. That’s where a lot of lost income is gonna go to as well. Right? Because you want to get the project going right away, but you got to do the steps first. You got to make sure you do due diligence, I guess.
Calvin Hexter
Okay, so you just bought a property. And once you know you’re looking at putting an offer on a property important to have something in the contract saying that you can visit the property afterwards once the conditions are removed before possession that the contractors go in there and you have the drawings everything that’s required so then you can hit the ground running once possession hub comes because there’s kind of this dead time for an investor or homeowner once condition removal happens to possession you’re not really doing much you’re kind of just hanging out waiting for the seller to you know getting your finance ready, get the seller to move their stuff out or whatever it is use that time as effectively as possible because you’re going to wish you did once you gain possession and now you’re starting from ground zero where you know you’re having to wait for the city to get back to you which could take, like you mentioned, a month, month and a half, maybe two months depending on how backed up they are. So next question. What are your best tips when legalizing a property? I know you already mentioned about timelines, getting it done earlier. Is there anything else that you can suggest to anybody that’s considering putting a legal secondary suite in, or may consider in the future?
Mark McLeod
honestly, Pinterest, or any kind of app that’s out there so you can see what you want… you can find what you want. Get those pre orders in place during that downtime when you’re waiting for permits to come in. Most cases the lights aren’t going to change their positioning. You know, you’re gonna look for maybe new appliances because appliances or even the fixtures for the bathrooms are purple. are green still or orange? Who knows? So yeah, all those pre orders are so important to do in that dead time for sure.
Calvin Hexter
Now, the biggest question I get is layout. So a lot of people don’t know where to put the bedrooms, the bathrooms, I mean, can they contact you? Do you do drawings? Because I think when it comes to secondary suite basements, I’ve seen beautifully, you know, beautiful fixtures, beautiful countertops, but the layout doesn’t make any sense. They forget to put the entry closet, and then they kind of just built this suite, they put all this money into it, they spent 65 $70,000 in the suite actually looks like shit. So are you there to help them when it comes to design? Like in regards to layout, like helping the blueprint, that kind of stuff?
Mark McLeod
100% You know, in my, in my background, I love to organize and draw and get things to the point where I know that it’s functional, I would like to live there myself. And I would project that to my potential customers, right or my future people I like to say. So yeah, I would do the drawings for those spaces. We’d have a sit down, we talk about the drawings, or if it was an out of town investment, say, they would get drawings before I even submit anything to the city. Because if they want to change something, this is the point, right? We do it in this dead time. We get the the drawings done and they’re good with it hopefully. People are visual as they can see from a two dimensional drawing what the final products gonna look like. Right? But yeah, absolutely. 100%
Calvin Hexter
Sounds good. I mean, you always have projects on the go, I’m sure that if anybody wants to check out if it’s not an out of town investor, they could probably come check out a job site, see what it looks like. I mean, I have a lot of investors I work with, and you’ve done a lot of work with them. I mean, they could go as long as the property is not tenanted, I mean, they could walk through it, and they can see they can, they can experience what it feels like. Because I know it is hard sometimes to walk into a property, whether it’s a completely blank slate concrete walls, or whether it just has this dysfunctional layout from the 60s. And now you’re completely redesigning it, walking into something I mean, most of the houses are going to be suite-ing are going to be like bungalows, bi-levels, more or less shaped like a rectangle. So there’s only so many layouts you can do. It’s now making it conducive to you know, where the utilities are, the furnace, a hot water tank, depending on what you’re doing. So you’re there to kind of help them every step of the way, and actually build a layout that’s going to probably help you with better rents, lower vacancy, lower turnover, and then when it comes time to sell, it’s at a more attractive suite. So doing your homework, when it comes to layout, in my opinion, is the best tip that I can give you – make sure you understand layout, the function of the space, because if you fuck that up, you’re going to be in a position you’re going to regret it big time and you just spent $65 – $70,000. It’s not like Mark has this Etch A Sketch, and he built it all over three months, and now he can just go like this and erase it and then build you a new one for free. Right? Don’t make that mistake. I see it all the time. So do your work. Get the right contractor. Mark, I’ve used you lots. I mean, my house alone you built me like this super deck. So if anybody wants I think you just said it to me for like, why don’t you actually do decks anyways, he built this amazing deck helped me with customizing some of the inside of the house highly, highly recommend him. A lot of investors that I’ve passed off to you’re super happy continue to use you as well. Super happy to have you on here today as well for your first ever Zoom. Other than that, thanks for joining me. That was fantastic. If anybody wants to reach you, where did they reach you?
Mark McLeod
Yeah, onmarkcontracting@gmail.com or be in touch with Calvin. He has my number and my other information as well.
Calvin Hexter
Perfect. Mark, you have a good evening! Bye.
