Our Tips for a Successful Plex Purchase
Whether you’re new to real estate or a seasoned investor, a plex can often be an excellent purchase, or your worst nightmare. The Agency has prepared a few tips for a successful purchase.
Take the time to carefully analyze the financial aspect
Although real estate investment is considered relatively low-risk, it’s essential to consider some considerable uncertainties and expenses at the start of the process. However, municipal and school taxes, as well as the “welcome” tax, can be offset by rental income.
First and foremost, it’s important to carry out a solid financial analysis. While duplexes involve less complexity, their return is generally lower than that of triplexes or quadruplexes. Check to see if the building requires major improvements or renovations, and study the neighborhood to get an idea of potential rental obstacles and long-term increases in value. Once you have all the information you need, draw up scenarios based on interest rates, costs, inflation and so on.
It’s also important to note that buying a plex shares some aspects with running a business, and that the return won’t be immediate. Patience is the key.
Know the specific down payment requirements
Having a sufficient down payment can be a hurdle to purchasing an income property. The minimum amount required is 20% of the property value, but for an owner-occupied duplex, the amount drops to 5%. For a triplex or quadruplex, the amount increases to 10%.
CONSIDER THE OPTION OF INTERGENERATIONAL HOUSING
The government of Quebec defines intergenerational housing as a housing concept allowing a family to live with its aging parents in a single-family home composed of two independent units of different sizes. However, according to a study by the Federation of Real Estate Chambers of Quebec, it can be a risky investment. Municipalities often have specific requirements for such houses, and the fact that they must be adapted for functionally dependent elderly individuals can lead to unforeseen renovation or maintenance expenses.
However, for a child buying an intergenerational home to house his or her parents, this can be an interesting option. The rent received for the parents’ housing can go towards mortgage payments.
Some municipalities offer financial assistance to help transform a building to comply with existing requirements. The Société d’habitation du Québec offers a residential adaptation assistance program, as does the City of Montreal with its major residential renovation or à la carte renovation program.