The Largest Number of Homes for Sale
Buying a multiplex: What you need to know
Are you thinking of
buying a multiplex? It could be a great investment, and the rent you collect could
even help pay off your mortgage on your primary residence… if you take the time
to ensure you are well prepared.
Here is what you need to know before buying a multi-unit:
Buying a multiplex is different from buying a home
You will need a commercial mortgage to buy a building with 5 or more units, while a personal mortgage can be used to buy a smaller plex of 2 to 4 units. In both cases, the financial institution will need to assess your financial situation. Additional criteria are used to evaluate multiplexes (+5 units) such as the building’s profitability and vacancy rate.
When you intend to live in the multiplex
The down payment is normally
20% but this can be reduced by purchasing mortgage insurance (CMHC, Genworth),
if, of course, your financial situation allows it. For a duplex, you need a minimum down payment of 5%,
while for a triplex, it is 10%. Add to that the acquisition costs such as the
property transfer tax (commonly known as the welcome tax), notary, etc.
Factors to consider when determining the profitability of a multiplex
It is important to take into
account its location and general physical condition. What will be the purchase
price? What will be the net income (rental income minus expenses such as taxes
and insurance)? Finally, consider the
estimated value of the property.
If you want to live there or have a member of your immediate family (children or parents) live there
It is possible to repossess a tenant’s unit, but notice
must be sent six months before the lease expires. You cannot evict a tenant so
that you can move in without following the specific rules as dictated by law.
You will need to manage tenants
Even if you take precautions, you will certainly have some
tenants who are more demanding than others. Do you have the time and desire to
manage multiple tenants?
You cover the cost of renovations.
Do not rely on rent increases to pay for renovations:
rent increases are regulated by the Régie du logement.
How to find the right multiplex for you
Don’t leave your
search for a good multi-unit property to chance. Visit Centris.ca to find multiplexes for sale. Search both residential
and commercial properties as each multiplex is categorized by the number of
units.
In addition, seek the help of
a trusted professional. A real estate broker will search for a property on your behalf while
keeping in mind your criteria, goals, and financial capacity.
Before making a purchase
If you want your
purchase to be profitable, you must absolutely verify the following:
- Visit the neighbourhood and find out what it’s like. The price of the building can be very attractive, but if the area has a questionable reputation, your investment could suffer.
- Have the building inspected by a professional.
- Check the leases and other relevant documents (taxes, etc.) to make sure everything is in order.
- Meet with tenants to get a feel for the clientele and get their feedback on the condition of the building and neighbourhood.
- Check with the City, the Régie du bâtiment and the Régie du logement to ensure everything is in order with the desired property. Have all taxes been paid? Does the building comply with the requirements of the Régie du bâtiment? Are there frequent legal disputes over unpaid rent?
Are you in good financial shape?
Buying a multiplex can be a good investment if all goes well. But do you have sufficient financial resources to deal with the unexpected? For example, would you be able to afford emergency work that must be done?
What if tenants don’t
pay their rent? Do you have enough cash to keep you afloat?
Get help from a real estate broker
Buying a multi-unit
building is a complex operation. For it to be profitable, it is important to
leave nothing to chance. That’s why a real estate broker is essential. A broker is a professional who
is trained to provide valuable support throughout the transaction. Not only are
they there to guide you, but also to protect you every step of the way.
Find out more or find a broker.
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