Quick Answer
A modular home purchased as an Additional Residential Unit (ARU) in Ontario can deliver over 30% annualized ROI on a $19,500 down payment. With a $155,000 home, $40,000 in site costs, and affordable rent of $1,733/month, the 5-year total return is approximately $56,000 — a 287% return on cash invested.
The Opportunity
Ontario's housing shortage has created an unusual investment opportunity: buy a modular home, place it on your property as a garden suite or laneway suite, rent it at "affordable" rates — and earn a return that rivals private equity.
Few investments offer annualized returns exceeding 30% with only $19,500 cash down. This one does, even without government grants.
How the Numbers Work
The model below uses a Habitat28 S28 EXT 1-bedroom modular unit — a CSA A277-certified factory-built home purpose-designed for ARU applications.
Total Project Cost
| Item | Cost |
|---|---|
| Modular home (Habitat28 S28 EXT, 1-bed) | $155,000 |
| Electrical/plumbing hookup | $25,000 |
| Foundation | $15,000 |
| Total financed | $195,000 |
| Down payment (10%) | $19,500 |
| Your cash out of pocket | $19,500 |
Mortgage: $175,500 at 6% over 25 years = $1,130.25/month
Rental Income
Ontario's affordable 1-bedroom rent ceiling for 2025 is $1,733/month. This is well below market rents in most Ontario cities (GTA 1-bed average: $2,300+) — meaning you will have no vacancy problem.
5-Year Cash Flow
| Year | Rent | Operating Costs | Mortgage | Cash Flow |
|---|---|---|---|---|
| 1 | $20,796 | $4,853 | $13,563 | $2,380 |
| 2 | $21,212 | $4,951 | $13,563 | $2,698 |
| 3 | $21,636 | $5,050 | $13,563 | $3,024 |
| 4 | $22,069 | $5,151 | $13,563 | $3,355 |
| 5 | $22,510 | $5,254 | $13,563 | $3,694 |
5-Year Total Return
| Source | Amount |
|---|---|
| Cumulative cash flow | $15,151 |
| Mortgage principal paid down | $16,200 |
| Property appreciation (3%/yr on $155K) | $24,692 |
| Total 5-year return | $56,043 |
| Total ROI on $19,500 invested | 287% |
| Annualized CAGR | 31.1% |
With Municipal Grants — The Numbers Get Better
Many Ontario municipalities offer grants for ARUs rented at affordable rates. Adding a $35,000–$95,000 grant to this model dramatically reduces your cash investment while maintaining the same returns.
| Municipality | Grant | Net Cash Investment After Grant |
|---|---|---|
| Barrie | $35,000 | Negative — grant exceeds your down payment |
| Burlington (ended Oct 2025) | $95,000 | Negative — grant covers project costs |
| Simcoe County | ~$40,000–$50,000 | Near zero |
At Barrie's $35,000 grant, your $19,500 down payment is fully covered with money left over. The property essentially costs you nothing upfront.
What Makes Modular Ideal for ARUs
- Factory-built speed: 4–6 months from contract to occupancy vs. 12–18 months for a site-built addition
- Fixed pricing: No cost overruns from weather or trades shortages
- CSA A277 certification: Accepted by municipalities for ARU permits — same as any residential construction
- Right-sized models: 1 and 2 bedroom units purpose-designed for garden suite dimensions
- Garden suite exemptions: In Ontario, garden suites are generally exempt from development charges — a significant savings
Important Considerations
- Rent must stay at or below affordable maximums to qualify for most municipal grants (often for 15+ years)
- Garden suites currently have no rent control in Ontario — but grant conditions may impose restrictions
- You need an appropriate lot: minimum size, setbacks, and servicing capacity vary by municipality
- The model assumes tenant pays utilities — some municipalities (like Simcoe County) require rent to include utilities for grant eligibility
Frequently Asked Questions
What is an ARU in Ontario?
ARU stands for Additional Residential Unit — a secondary dwelling on a property, including garden suites, laneway suites, basement apartments, and coach houses. Ontario legislation allows most residential properties to add an ARU as of right, without rezoning.
Do garden suites pay development charges in Ontario?
No — Ontario legislation generally exempts garden suites and laneway suites from development charges. This is a significant cost saving compared to other types of new construction.
How much does it cost to add a modular garden suite?
A complete modular garden suite in Ontario — home, foundation, and utility hookups — typically costs $155,000–$220,000 depending on size and site conditions. Contact ModularHomes400.com for current Habitat28 pricing.
What rent can I charge for an affordable ARU in Ontario?
Ontario 2025 affordable rent maximums are $1,464 (bachelor), $1,733 (1-bed), $2,008 (2-bed), and $2,330 (3+ bed). These are the rent ceilings to qualify for most municipal ARU grants.