How much rental income can I expect from a laneway house in Vancouver?

Laneway houses in Vancouver typically rent for $2,800-$4,500 per month as of 2025, depending on size, location, and finish quality. This represents strong rental income potential, but you'll need to factor in construction costs of $200,000-$400,000+ and ongoing expenses.

Rental Rate Breakdown by Area:

West Side neighborhoods (Kitsilano, Kerrisdale, Dunbar) command the highest rents at $3,500-$4,500 monthly for well-finished 800-1,000 sq ft units. East Side locations (East Van, South Van) typically see $2,800-$3,800 monthly. Premium finishes, parking, and proximity to transit can push rates higher, while basic finishes or challenging locations may rent for less.

Market Factors Affecting Rental Income:
Vancouver's rental vacancy rate sits around 1-2%, creating strong demand for quality rental housing. Laneway houses are particularly attractive to tenants seeking more space and privacy than typical apartments. Units with separate parking, outdoor space, and modern appliances rent fastest and command premium rates. Location matters significantly—proximity to SkyTrain, UBC, or downtown Vancouver can add $300-$500 monthly to rental potential.

Construction and Regulatory Considerations:
Building a laneway house requires using a Licensed Residential Builder registered with BC Housing, as these are considered new construction under the Homeowner Protection Act. Your unit will be covered by 2-5-10 home warranty insurance. Maximum size is typically 1,000 sq ft on a standard 33x120 lot (0.25 x lot area), up to 2 storeys. All laneway houses must comply with BCBC 2024 and current Energy Step Code requirements, which can add to construction costs but improve long-term operating efficiency.

Financial Reality Check:
Construction costs currently run $200-$400 per square foot depending on finishes and site complexity. A typical 800 sq ft laneway house costs $250,000-$350,000 to build, plus $15,000-$25,000 in permit fees and professional costs. At $3,500 monthly rent ($42,000 annually), you're looking at roughly 8-10 years to recover construction costs through rental income alone—not accounting for financing costs, property taxes, insurance, and maintenance.

Tax and Legal Considerations:
Rental income is taxable, but you can deduct mortgage interest, property taxes (proportional), maintenance, and depreciation. The laneway house will increase your overall property assessment, raising property taxes. Ensure you understand BC's residential tenancy laws and consider professional property management if you're not experienced as a landlord.

Next Steps:
Get quotes from Licensed Residential Builders for construction costs specific to your lot. Consult with a mortgage broker about financing options—some lenders offer renovation mortgages that include construction costs. Research comparable laneway house rentals in your specific neighborhood to refine income projections. Consider hiring a property management company (typically 8-12% of rental income) if you want passive income rather than active landlording.