I understand you’re considering a backyard unit for your home. It’s a smart move, especially in Toronto’s current housing market. Many homeowners are choosing to build these units to unlock the income potential from a garden suite. With rent prices staying strong, it could be a great way to support your finances.
Why Garden Suites Are a Great Investment
These backyard units are not just a good investment; they can also add value to your property. Plus, having a separate space for renters can maximize the income potential from a garden to provide the revenue you need. If you have any questions or want to discuss ideas, I’m here to help!
As a contractor with over 15 years of experience building and renovating homes across the city, I can tell you: if you’ve got the space and you’re allowed to build, a garden suite can be one of the smartest long-term investments to tap into the income potential from a garden suite on your property.
What Can You Anticipate in Terms of Rental Income?
Let’s talk numbers, because that’s what matters when exploring the income potential from a garden suite at the end of the day.
Rental Income Estimates
In most Toronto neighborhoods, a well-built 1-bedroom garden suite can rent for $2,000 to $2,300/month in 2025. If you’re closer to transit, downtown, or in high-demand areas like High Park, Leslieville, or the Beaches, you could see upwards of $2,500/month, boosting the income potential from a garden suite. A 2-bedroom unit? Depending on finishings and location, you’re looking at $2,700–$3,200/month, further enhancing the income potential from a garden suite.
Remember, these are for legal units that meet city requirements, including sound insulation, a separate entrance, proper fire rating, and more. Renters are willing to pay more when they know it’s safe, quiet, and done right.
Is It Worth the Investment?
Here’s how I usually break it down for my clients considering the income potential from a garden suite:
Cost and Return on Investment
- Build Cost: On average, a 1-bedroom garden suite in Toronto costs anywhere from $250K to $350K to build, depending on finishes and layout.
- Monthly Income: Let’s say you’re getting $2,200/month. That’s $26,400/year in gross rental income, showcasing the income potential from a garden suite.
- ROI: If you self-finance, you’re looking at a 7–10% return, not including the bump in property value. If you’re using a home equity line of credit or mortgage, your cash flow will depend on your borrowing terms, but it’s often positive from year one.
And don’t forget, this income can help cover your mortgage, pay off your home faster, or provide a buffer in emergencies.
What Renters Are Looking For
A few things I’ve noticed over the years when it comes to renting garden suites:
Key Features for Renters
- Privacy is key. Tenants don’t want to feel like they’re living in someone’s backyard. Fencing, landscaping, and a private entrance go a long way.
- Natural light matters. Big windows (where possible) and innovative layouts make the space feel bigger.
- In-suite laundry is a must if you want top-dollar rent. So is air conditioning.
- Storage—even a small shed or built-in units help.
The Honest Truth
Building a garden suite isn’t a quick project. You’ll deal with permits, zoning reviews, inspections, and construction timelines. It’s a 6–9 month process from planning to move-in ready, assuming everything runs smoothly. But with the right team and realistic goals, it’s one of the cleanest ways to turn unused land into steady income potential from a garden suite.
And here’s something most people don’t think about: you can build it for your parents now and rent it later, or vice versa. Flexibility is the name of the game here.
Why Spend $250K to Rent Out a Space for $2,550/Month?
1. Turn Dead Space into Income
If you have a backyard or unused space, you’re already spending money to maintain it. Building a rental suite can transform that space into a source of income potential from a garden suite every month.
2. The Numbers Add Up
Let’s do a simple calculation:
- Rent: $2,550/month
- Interest Payment: $1,250/month (or up to $1,800 including principal)
- Cash Flow: $2,550 – $1,250 = $1,300 (or $2,550 – $1,800 = $750)
So, even after paying the loan, you could still make between $750 and $1,300 monthly, highlighting the income potential from a garden suite.
3. Rents Increase, Payments Stay the Same
Once you set your loan payment, it won’t change (unless you refinance). But rent typically goes up over time. That $2,550 could become $2,900 or more in a few years, increasing the income potential from a garden.
4. Rental Income Helps Your Lifestyle
The money you earn from renting could:
- Help you get a larger mortgage when you want to buy another property.
- Cover most or all of your housing costs.
- Give you more freedom to work less or save more money.
5. You Control Your Investment
Investing in your property often has the best long-term return compared to other investments.
Bottom Line
Spending $250K to make $2,550/month might not seem exciting at first. However, looking at the bigger picture, it’s a steady income potential from a garden suite and increased property value. It gives you more freedom, all while living nearby and managing the rental yourself.