Don’t qualify for a mortgage? Submit a business plan instead!

Attainable housing across Canada is a hot topic right now with governments, communities, and individual families exploring creative solutions.

So, how can you leverage tiny homes to make the dream of home ownership a reality? Roy Suraj from Tiny Estates shared insights on how tiny homes can be introduced into existing neighbourhoods as additional dwelling units and how they create opportunities for additional income for homeowners while adding affordable housing to the mix.

Photo: Tiny Estates

Thinking outside of the box

While most Canadians are looking to find the cheapest property available, what if we start to get creative instead?

Roy Suraj explains that if you look for properties that are already split into multiple units on a decent sized property, you can submit a business plan that includes adding a tiny home to help you get the funds you need. Roy explains, “Let’s say you’re trying to get a mortgage on a duplex. You can show the bank that there’s potential for rental income. As long as you can prove to the lender that there is potential for rental income [in the duplex as well as adding a tiny home], they might bump it up and give you full approval.”

With Roy’s help, you can appraise the income potential before purchasing the home. You can create a business plan that demonstrates the viability of all rental income. Roy explains, “If someone wants to buy a home, we show them ideas. We might visit the property to ensure that no unexpected issues will hinder the conversion. We’ve even sent professional trades to properties before our clients have purchased them to cover all bases. Next, we call the township and set up a meeting with them before making an offer on the home. Once we receive their approval, we proceed.”

Photo: Tiny Estates

Tiny Estates: Making home ownership a reality

Roy and his business partner established Tiny Estates after recognizing the need for affordable housing in the Kitchener-Waterloo region, particularly among young people. Their organization assists homeowners in Ontario by providing multiplex solutions, often in the form of rental opportunities. This includes placing tiny homes on foundations in backyards or converting existing units into multiple rental units.

Initially, Roy and his partners focused on duplex conversions. However, with the rising cost of materials, they realized that a duplex might no longer be sufficient to create affordable housing. Roy explains, “For example, if you have a mortgage payment of $4,000 per month, either you or the renter still have to absorb a significant amount of [that amount].”

Recognizing the growing popularity of backyard rental units in the United States, Roy and his team saw the potential for similar success in Canada. They owned a heritage home on a spacious property in Kitchener, which had already been converted into a triplex with a garage studio apartment. They decided to approach the city about adding a tiny home in the backyard.

Photo: Tiny Estates

“We went to the City of Kitchener, and they said, ‘Not a lot of people have done this yet, but we definitely see the value in it.’ After months of back-and-forth, we finally received the green light and built one of the very first tiny homes in the Kitchener-Waterloo Region.”

Everybody’s interested in both garage studio units and the tiny home because they’re separate from the main house.

Roy recalls, “We thought most people would want to rent [an apartment inside the] house instead of going for the tiny home. But to our surprise, it’s way more booked up than any other unit. Everybody’s interested in both garage studio units and the tiny home because they’re separate from the main house.”

Advantages of building a tiny home over a basement apartment

When considering ways to generate rental income from your property, why should you opt for a tiny home instead of finishing the basement? While both options are excellent choices (with basement apartments often being successful), Roy highlights the advantages of tiny homes.

“It’s about privacy. We’ll install fencing and position the home away from the main house. The only shared space might be the driveway, but we have a team that ensures a clear separation.”

“For most people we work with, they say they don’t even notice anybody living in the tiny home because we create private walkways at the back. Privacy fencing ensures that you still enjoy your backyard while the tenant has their section.”

Photo: Tiny Estates

“Many older parents have children reaching the age where they want to get married and have their own families but can’t afford homes. Instead of buying their child a condo, parents might say, ‘Why don’t we simultaneously appreciate our property value and build a tiny home?’ Two- or three-bedroom models are available, depending on the yard’s size.”

‘Why don’t we simultaneously appreciate our property value and build a tiny home?’

“We’ve seen cases where parents move into the tiny home for retirement and give their children the main house, or they choose a spacious enough tiny home for their children. This has become increasingly common.”

Avoiding the dangers of purchasing an illegal duplex

Buying an illegal duplex carries significant risks, both physically and financially, as well as potential liabilities. So if you are considering this path to home ownership, make sure you do your research.

“We’ve encountered a few duplexes on the market that were illegal. When our tradespeople visited these properties, they immediately noticed something was amiss. Renting out these properties legally was not possible, and many people are unaware of this.”

Photo: Tiny Estates

“These properties pose several issues. The electrical and plumbing work is not done properly, and the windows do not meet safety requirements. They are unsafe. If a fire were to occur, the insurance company would not cover it.”

“Municipalities would catch up to owners of illegal duplexes if they attempted to rent them out legally. This can result in legal consequences and potential lawsuits. Advertising an illegal duplex is also against the law.”

“If someone unknowingly buys an illegal duplex and rents out part of it, problems may arise once the tenant realizes that drainage systems are not working correctly or that the windows are not up to code. Once authorities become aware of this, it becomes a significant issue.”

Bottom line: make sure you have a knowledgeable and trusted inspector check out any unit before you put in an offer.

Why rent out the tiny home when you can live in it?

At Tiny Homes in Canada, we are very familiar with how hard it can be to find land to build a tiny home. In fact, we’ve dedicated a whole land directory to help Canadians figure it out. If you are reading this, you probably dream of living in a tiny home!

Tiny Estates can help make this possible. Yes, it’s a little more complex – but if you can submit a well researched business proposal for property you love, there’s no reason you can’t live in your newly built tiny home on the property while bringing in income from a multi-unit residence – or splitting the purchase with friends and family.

Photo: Tiny Estates