4 reasons to buy a duplex – Most people dream of owning a single-family detached home and never consider a duplex type property. A duplex usually has 2 separate entrances and addresses. Across Canada as real estate becomes more and more unaffordable, these strategies will help you get into the real estate market where you would perhaps otherwise not be able to.
Did you ever consider buying a duplex instead of a single-family home or a condominium? As a first-time buyer you may not have considered the benefits of buying a duplex and how this can help you in the long run. As someone who is perhaps looking to retire or semi-retire, this may be a wonderful way to downsize.
Yes of course there are some disadvantages as nothing is perfect. In a duplex, you would indeed be living either upstairs or downstairs from your tenant, and as the landlord you will collect rent and declare this as part of your yearly income with the offset of expenses. There may be some work involved such as repairs, dealing with leases and tenants. However, in my opinion the long-term benefits such as lower cost of living, increased property appreciation and equity as well as the ability to write off expenses far outweigh the drawbacks.
Here are 5 benefits to consider before making the decision. These advantages stem from my own personal experience, as my first property was a duplex. As well, from hundreds of my clients who have purchased a duplex and benefited with long term gains.
- A Duplex is more affordable
Perhaps you are looking at moving into a neighborhood where you do not qualify to purchase a single-family home because prices are too high. Buying a duplex with a rental income will help you qualify for the mortgage and get into the neighborhood you want to be in. Furthermore, I recommend to many first-time buyers to live in the upstairs unit for a few years, pay down the mortgage quicker by collecting the rent from the downstairs which is usually is a higher amount. You can renovate or upgrade finishes, and then chose your tenant and move to the downstairs unit.
You can keep more of your capital for renovations or other investments since you can purchase a duplex with as little as a 10% down payment. This gives you more wiggle room with your liquid cash position.
- A duplex is a gateway to investing and buying a single-family home
Owning a duplex is a great first investment especially when you live in it. You will quickly learn about what expenses you can write-off on your taxes such as the interest paid on your mortgage. Learning about leases and managing repairs and tenants is very useful if ever you want to build your real estate portfolio.
After the first 5 years, when your mortgage is up for renewal and the mortgage has been paid down, there will be equity built up and you can borrow up to 65% of the value of the duplex. Many have been able to buy their first single-family home by using the equity from their duplex. This allows you to use a large down payment and keep the payments manageably low on a single-home property.
- A duplex goes up in value quickly
A duplex in most major Canadian cities, has a higher appreciation value than a single home or a condominium. In Montreal duplexes are very sought after and prices continue climbing. In the Greater Montreal Area, the appreciation in the past year has increased on average 10% on duplexes just by holding onto these properties.
- A Duplex gives you many options
You can consider short term rentals if you are in a highly desirable area of your city. A part of the duplex may be used as a home business office. The finished basement may be converted into a bachelor suite with an additional rental income. Two people who would otherwise not be able to afford a property on their own, can become co-owners and share the expenses of a duplex. A Duplex can serve as a type of inter-generational style living situation. If a single home is truly what you want and need, then perhaps you can convert the duplex into a single-family home? This may be a good option years after the initial purchase or as a resale strategy.
Whatever you decide, make sure to seek the advice of an expert team such as a mortgage broker, realtor, inspector and a notary.
Helen Akrivos is a Montreal real estate expert who is passionate about educating and inspiring everyone to succeed in real estate! She holds a Chartered real estate broker license and is President of North East Realties agency in Montreal. As a lecturer in the Residential Real Estate Program at College Lasalle, Co-Host of “The Real Estate Show” on CJAD AM800 radio and contributor to the MTL Times newspaper, Helen shares her stories of real estate success to help as many people as possible! E-mail your comments to firstname.lastname@example.org
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