Benefits: Laneway House
Cash-flow and benefits from A laneway house
The financial incentive to build your laneway house is attractive… you can get good rental income from a laneway house. The rental return far out weighs the investment cost. Generally, rental income from laneway housing produces a net positive cash-flow to a home owner. You can view the photos of some laneway houses posted on the City of Vancouver website by following this link.
Below are 2 scenarios, one for a 500 sq ft laneway house, and the other a 750 sq ft laneway house:
500 sq ft laneway house:
* At *$200 per sq ft, cost of construction is $100,000
* A mortgage interest rate of 4.50% and 25 yr amortization makes for a monthly P&I mortgage payment of $553 (interest cost is $371 a month)
* A 50/50 mortgage interest rate of 2.85% and 25 yr amortization makes for a monthly P&I mortgage payment of $466 (interest cost is $236 a month)
* Monthly rental income is $1,000+
750 sq ft laneway house:
* At *$200 per sq ft, cost of construction is $150,000
* A mortgage interest rate of 4.50%, 25 yr amortization makes for a monthly P&I mortgage payment of $830 (interest cost is $557 a month)
* A 50/50 mortgage interest rate of 2.85% and 25 yr amortization makes for a monthly P&I mortgage payment of $698 (interest cost is $354 a month)
* Monthly rental income is $1,800+
You will find that you can enjoy a healthy net income after mortgage payment. Of course there are other costs besides one time design and construction, the increase in property tax will be small relative to the income from rent.
*Some experienced contractors are confident that they can build more affordable laneway houses at between $150 to $175 a sq ft.
Follow this link for details on the City of Vancouver’s laneway house regulations.
