Blog > Basement Apartment vs. Garden Suite in Markham: Which Earns More and Sells Better?
Basement Apartment vs. Garden Suite in Markham: Which Earns More and Sells Better?
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Is a basement apartment or a garden suite better for rental income in Markham?
For most owners, a legal basement apartment gives the better return on cost, because the structure already exists and conversion usually costs far less than building new. A garden suite can earn more rent and offers more privacy, but one Markham builder estimates $150,000 to $350,000 or more to build one, which lowers the yield. Both need a building permit, fire and building code compliance and suitable servicing. Ontario allows up to three units on most serviced lots, and Markham has proposed four. On resale, a legal basement suite appeals to a wide pool of buyers, while a garden suite appeals most to multigenerational families. Run the numbers on your actual home before deciding.
Side by Side: Basement Apartment vs. Garden Suite
| Basement apartment | Garden suite | |
|---|---|---|
| Starting point | Existing basement | New building in the rear yard |
| Typical cost | Usually lower, depends on ceiling height, plumbing and exits | One Markham builder estimates $150,000 to $350,000 or more |
| Privacy | Shared walls and floors | Fully separate |
| Rent potential | Lower, often less light and space | Higher for a comparable size, more like a small house |
| Approvals | Building permit, fire separation, exits | Building permit plus zoning, servicing, setbacks and access |
| Yard impact | None | Uses backyard space |
| Lot needed | Most detached homes | Enough depth, access and servicing |
Michael John Lau, a REALTOR® with the Kaizen Real Estate Team, one of the most active real estate teams in Markham and York Region, helps investors compare both options on the same property, including the effect on resale, before they buy a home for its suite potential.
How to Compare Net Yield
There is no published Markham data on typical returns from basement apartments or garden suites, so run your own numbers with this simple formula:
Net yield = (annual rent − vacancy − extra costs) ÷ total cost to create the unit
Extra costs include added insurance, utilities you cover, repairs and any increase in property tax. Here is an example with figures for illustration only:
| Example | Basement apartment | Garden suite |
|---|---|---|
| Cost to create | $90,000 | $250,000 |
| Monthly rent | $1,900 | $2,500 |
| Annual rent, less 5% vacancy | $21,660 | $28,500 |
| Extra yearly costs | $3,000 | $4,000 |
| Net yield on cost | About 20.7% | About 9.8% |
In this example, the garden suite earns more rent but returns less on the money spent. Your result depends on real quotes and real rents. Tax on rental income is a separate question, so speak to an accountant.
Shopping for a home with suite potential? Call Michael John Lau, REALTOR®, at (416) 700-0286 to check ceiling heights, entrances and lot depth before you make an offer.
Permits, Fire Separation and Parking
- Building permit: both options need a permit from the City of Markham, with inspections and an electrical inspection.
- Fire separation: a basement apartment needs approved separation from the main unit, safe exits and working smoke and carbon monoxide alarms. A garden suite is separate, but must still meet the building code and emergency access rules.
- Parking: Ontario limits how much parking cities can require for additional units. Confirm Markham’s current standard for your lot.
- Short-term rentals: Markham regulates short-term rentals separately. If you plan stays of less than a month, check the City’s licensing rules first.
- Development charges: Ontario law exempts most additional units from development charges.
Markham’s proposal to allow up to four units per lot had a public meeting on 9 September 2025 (file PR 24 196906). Confirm the current status with the City. For a full guide to garden suite rules, see whether you can build a garden suite on your Markham property.
Resale and Liquidity
Liquidity means how easily you can sell the home later, and to how many buyers.
- Legal basement apartment: appeals to first-time buyers who want help with the mortgage, investors and multigenerational families. A wide buyer pool tends to support liquidity.
- Garden suite: appeals strongly to multigenerational families and some investors, but some buyers prefer a full backyard. It cannot be sold separately from the main house without a severance.
- Unpermitted units: reduce liquidity. Some lenders will not count the rent, and buyers may discount the price for the cost of making the unit legal.
Financing the Project
CMHC-insured refinancing can let eligible owners borrow up to 90% of the home’s value after adding a suite, on homes up to $2 million, with amortization up to 30 years. The federal Secondary Suite Loan Program announced in 2024 was cancelled in the 2025 federal budget, according to RE/MAX Canada. Home equity lines and construction loans are other options. Speak to your lender early, before you design.
Which Should You Choose?
- Start with the property. Ceiling height and a separate entrance favour a basement apartment. A deep lot with side access may suit a garden suite.
- Get two real quotes and two realistic rent estimates.
- Run the yield using the formula above.
- Think about your exit. Who will buy this home from you in ten years?
Choose the option that fits your situation. Ultimately, the decision is yours. The goal is to make sure you have all the information.
Next Steps
- Investing in Markham real estate: find homes that suit a second unit.
- Buying a home in Markham: how Michael helps buyers assess suite potential.
- Request a free home evaluation: know your value before you build.
Frequently Asked Questions
Is a basement apartment or garden suite cheaper to build?
A basement apartment is usually cheaper because the structure already exists. One Markham builder estimates $150,000 to $350,000 or more for a garden suite, plus permit fees.
Which earns more rent, a basement apartment or a garden suite?
A garden suite often earns more rent for a similar size because it is fully separate and gets more light. Net yield can still be lower because it costs more to build.
Do I need a permit for a basement apartment in Markham?
Yes. A second unit needs a building permit from the City of Markham, with inspections, fire separation, safe exits and an electrical inspection.
How many units can I have on my Markham lot?
Ontario allows up to three units on most fully serviced residential lots. Markham has proposed allowing four, with a public meeting held on 9 September 2025. Confirm the current status with the City.
Does a rental suite help or hurt resale value?
A legal, well-built suite can widen the pool of buyers. Unpermitted units can hurt value because some lenders will not count the rent and buyers may discount the price.
Can I sell a garden suite separately?
No. A garden suite is part of the same property and cannot be sold separately without a severance approval, which is a separate process.
Work With Michael John Lau in Markham
Michael John Lau helps Markham investors and families buy homes with real suite potential, not just a basement or a big yard. That includes checking ceiling heights, entrances, lot depth and permit history, and comparing sales of homes with and without legal suites. The goal is an investment that works today and sells well later.
📞 Contact Michael John Lau, REALTOR®
🌐 www.callmikelau.com
Planning a mortgage helper or rental suite?
Michael John Lau helps buyers and owners compare suite options and their effect on value before they commit.
Michael John Lau, REALTOR® · Markham, Ontario · (416) 700-0286
Disclaimer. Michael John Lau is a licensed REALTOR® serving buyers and sellers in Markham, Ontario and the Greater Toronto Area. Rules are summarized from Ontario’s Planning Act as described in public legal commentary and the City of Markham’s public meeting notice for file PR 24 196906. Garden suite costs are a Markham builder’s estimate, and financing details are from RE/MAX Canada. The yield example is for illustration only. This article is general information, not legal, tax or financial advice. Confirm rules with the City of Markham and speak to a lawyer, accountant and lender before you build.