Real Estate

Buying a duplex/triplex, renting rooms - where to begin?

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  • Jul 14th, 2020 8:36 am
Aug 1, 2005
299 posts

Buying a duplex/triplex, renting rooms - where to begin?

Hi all,

I've been on RFD for a dog's age, but have never really come to the RE forums until recently. I would greatly appreciate your insights. My goal is to build equity in property, and also improve my lifestyle. Toronto is unaffordable and no longer what I want, but I'm negotiating with my employer for permanent permission to work from home 4 days/week. I'm considering relocating to a tourist-heavy community 2h away from Toronto, and then commute into TO once a week mostly by Go train.

To help finance the home, I'd like to rent out rooms. (My family was house poor growing up, and I never want to be in that situation. I also lived with my dad for a while, who rented two rooms from a guy in his house, so I'm fine with this.) I'm considering options of going with a duplex/triplex, OR renting rooms from a single home and living in the basement, OR rent individual rooms short-term on airbnb.

I saw several properties in-person today, and these three caught my attention:
  • Duplex plus unfinished basement with separate entrance (so an almost-triplex) for $390K: Each unit in the duplex had 2 bedrooms. In theory I could turn the unfinished basement into a unit. 1940s building with multiple additions built. The building was dilapidated, bathrooms probably rotted out underneath the wood/walls, who knows what disasters lurking below. Apparently it was priced at the land value (tear-down).
  • 3BR Townhome condo for $390K, $500/mo maintenance. Recently renovated, almost turnkey solution. One BR has an ensuite. I could live in the basement, but I don't think I can get a kitchen in there. No separate entrance.
  • New 3BR freehold preconstruction from $420K: Almost turnkey. This unit would have a walkout basement with a sliding door. Standard finishes. It won't be complete until March (at the earliest), which would give me more time to save for increased cost, while locking in a price and mortgage rate right now
The questions I have:
  • What is an acceptable general rule for how much rent you need to take in to make renting viable? It sounds reasonable to me that rent should cover the mortgage (plus renos) over a 10 year period (this seems in line with investing). I also read to rent at 0.8-1% of the property value. But are there generally accepted standards? And is it possible we're at a bad point in time to do this, based on high property prices and dropping rents?
  • Does one or more of the home options above pop out as a Bad Decision? I'm not opposed to hard work renovating. And in all situations I'd be setting aside a basement just for me (maybe that's a bad decision?).
  • Do freehold maintenance fees approximately end up being the same as the stated condo fees on an equally sized property? (while I don't mind hard work renovating, I hate mowing lawns, shoveling snow and raking leaves, so if freeholds don't provide a significant cost savings I'd rather go condo)
  • What kind of reno costs can you expect to pay to renovate lower end rental homes? I recognize that nobody can give a exact numbers aren't possible, but if we assume the worst case, including rotted bathroom, shingle replacement, some substructure repairs, and doing lower end finishes reno on the 1400sqft duplex, am I looking at like 50K, or more like 200K? (I can paint, install click-together flooring, tile, and install backsplashes and light fixtures, but I can't do plumbing, electrical, framing...)
Appreciate any insights.
5 replies
Deal Addict
Sep 6, 2017
4427 posts
You sound like you can tackle 80% of the renovations where labor is the most expensive. So the duplex sounds ideal.
Dec 12, 2011
203 posts
You have lots of questions which are very general in nature, so it's hard to give you any specific answers. I can tell you however that you can only charge rent for what the market is dictating, not the rate at which you will break even or start cash flowing. And yes, post covid rent is lower than it was pre covid so it is not the best time with so much economic uncertainty. You would have to look at rent comparables in the neighbourhood you are planning to buy. Also, are you ready to deal with the stress and work of being a landlord? Why would you say you hate doing shovelling snow, yardwork and all that jazz? You better learn to like it or tolerate it if you plan on being a landlord as there will be many other issues you will have to tackle. If you aren't mentally prepared, maybe this isnt for you. It is very tough to say how much it costs to maintain a freehold because everyone's house or property is different. I do know that if you maintain it well and address all issues in a timely manner, you can avoid some costly repairs down the road. I can also tell you that if you plan to live in the basement of a house while you rent out upstairs, you can charge more upstairs if you have completely separate units. Meaning you have your own separate entrance, obviously you will have to have a kitchen in the basement, and you will also have to build a washer and dryer upstairs so your tenants will have private laundry. Tenants that are paying a premium hate sharing laundry, having to only do laundry on certain days, or take their laundry to a laundry mat. Also, post covid every industry that is tourist related is getting hammered? Why? There are no tourists anymore. You sure you want to purchase a house where your tenants are working in the service industry? I dont know brother, I recommend more research is needed.
Deal Guru
User avatar
Mar 23, 2008
13006 posts
Keep in mind that if you share kitchen or bathrooms with your tenants, the relationship isn't governed by the RTA, which can mean less hassles if things don't work out with the other person. You'd have to abide by the tenancy agreement you sign with the tenant, but you could evict the tenant much easier if you need to.

And your "0.8 to 1%" rate idea doesn't make sense to me, at least as a "one size fits all". If you bought a turnkey apartment style condo for $500k, you won't be able to rent it out for $4,000 to $5,000. You need to look at the rental market in the area and see what the going rent is. Also keep in mind that when you talk about getting your mortgage covered, part of your mortgage is interest, and part of it is principle. The interest portion is tax deductible, the principle portion is not.

Finally, you talk about not wanting to do basic yard work like mowing or shoveling snow. You can pay someone to do that for you, but those are landlord responsibilities to make sure they get done. And if you pay someone, that comes out of your profits (but is also tax deductible). You can negotiate a deal with a tenant to do the work, but you'll want to do that carefully so it's separate from your tenancy agreement. So you can terminate the "maintenance contract" if they stop doing it properly. If you don't do it properly but just reduce their rent with a verbal agreement that they'll do the work, if they don't do it, you won't have any recourse. Again, possibly not as big of a deal if you're sharing the space.

Aug 1, 2005
299 posts
Thanks all. With the current situation and depressed rental rates relative to house prices, this might be a poor time to invest.
Deal Fanatic
User avatar
Sep 8, 2007
9248 posts
Way Out of GTA
If “ I hate mowing lawns, shoveling snow and raking leaves”...I’d suggest you go a different route than being a landlord. One of the most important roles as a landlord is keeping on top of repairs and maintenance.

Plus the laws against landlords are horrible in Ontario, it’s becoming trendy not to pay rent and get away with it here. You can’t even evict right now. Expect more insanity from tenants if there’s any further crisis and landlords forced to foot the bill.


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