So you’ve been renting for several years and you’ve worked your way into a sound financial situation. Time to buy a house, right? Absolutely. But the important question is: what kind of a house? After sharing buildings with other tenants all of your adult life, you’ll probably be imagining moving your family into a snug little single dwelling castle of your own. However, that isn’t necessarily the wisest decision for everyone. Of course, there is something undeniably appealing about having a place all to yourself – but don’t forget to consider the charms of sheltering a tenant or two under your newly purchased roof. Buying a Duplex, Triplex or Fourplex can have a huge impact on your future as a property owner.
Here’s why buying a duplex, triplex or fourplex can help you get ahead in the real estate game.
Buying a home is an investment that is certain to pay off over time – but this life-changing transaction does entail some large cash expenditures during its initial stages. In addition to the usual yearly municipal and school taxes, there is the ever-popular “welcome tax”. However, none of these unavoidable fees will seem nearly so daunting if you defray your monthly mortgage payments with rental income.
Every home purchase is unique and that goes for buying a duplex or larger too. However, for the sake of argument, let’s imagine a fairly typical small plex listing on the island of Montreal. Many of these properties sell in the $400,000 to $600,000 range. Since you may be looking for a place with a nice back yard for your children to play in and a good-sized first floor master dwelling area, we’ll work with a figure closer to the higher end of that range – say, a triplex for $575,000. With typical down payments hovering around 10% (though if you won’t be living there, it will be 20% down payment minimum), that would leave you with $517,500 to pay. Of course, mortgage rates vary widely, and a good broker will help you to get the best deal possible from a bank; however, let’s say that yours comes in at 2.99%. That would result in a monthly mortgage payment of $2446.39.
Now here comes the good news. When you buy a duplex or really any property with income, that monthly obligation is considerably reduced. Assuming that you choose a triplex with well-maintained tenant dwellings on the second and third floors, you can probably rent these apartments for at least $750 each (or $1500 total), if not more depending on location. Remarkably, after collecting the rent, you would only have to disburse $946.39 of your own savings to cover the mortgage (and, of course, a fourplex would yield an even larger percentage of the required funds). At that point, you would have two very attractive options to choose from, assuming you had budgeted to pay a much larger mortgage.
Of course, it’s important to remember that the benefits of rental income do come at a cost to the homeowner. Most tenants and small landlords get along wonderfully, but there is no way to guarantee that this will be the case. In the event that relations do become strained, you may find yourself in a difficult situation that requires the mediation of the Régie du Logement – a body that has a mixed record when it comes to upholding the interests of property owners.
…a reasonably energetic property owner can handle most minor repairs him or herself
Moreover, even if everything remains personally harmonious within your multiplex, you will still have to maintain one or more dwellings in addition to your own. However, a reasonably energetic property owner can handle most minor repairs him or herself – and much of what you spend beyond that can be written off at tax time. Heavy or light, these responsibilities should definitely factor into the prospective multiplex buyer’s decision-making process.
Multiplex homes are very common in the downtown core, the greater sud-ouest areas (i.e. Verdun, LaSalle, Ville-Émard) and downtown-adjacent neighbourhoods like Villeray or Park Extension. Anyone planning to buy a home with attached income in one of these areas will have a lot of selection. A good real estate broker will save you time and money by weeding out the poor choices.
However, if you are looking to settle down somewhere in the West Island, Vaudreuil-Dorion, Pincourt or Ile Perrot, you will find fewer options of this kind and your broker will be first to know about great deals that come up. Here again, there are many factors to consider – i.e. the type of school you’d like your children to attend, the kind of traffic and noise you are prepared to deal with and the amount of time you are willing to devote to your daily commute. Either choice of address offers definite advantages, depending upon your needs and concerns.
The same can also be said of the choice between a single dwelling home and a multiplex. You will want all of the facts in front of you before making such an important decision – along with the best possible advice. If you would like to pursue this inquiry further, I invite you to contact me for a no-obligation consultation.
An earlier version of this article I wrote appeared in the Montreal Times newspaper.
I'm Andrew Mitchell, Chartered Real Estate Broker and Owner of Vistacor Realty Group. I help buyers, sellers and investors in the West Island, Montreal and Vaudreuil-Soulanges areas buy and sell homes. My goal is to provide you with useful, straight-forward insights and relevant real estate market updates. Contact me with any questions. Follow me on twitter here.