How to get started:
Buying a house for a home will give you a great place to live. Buying a duplex for a home will give you a great place to live andmany options towards an opportunity to make money.
| How to get started: Buying a house for a home will give you a great place to live. Buying a duplex for a home will give you a great place to live and many options towards an opportunity to make money.Where to start:Buy a duplex. It’s going to be your home for the next 1-3 years, so pick an area you love and a place you like. If you like it for a home, chances are, other people will to, so it will be good for resale. Make sure that the duplex needs work. That is a must. You won’t be making any money off of something already renovated.No Money?? Banks lend 0% down now. Sure there is a higher interest rate (about 2% higher maximum), however you’re only paying for ½ the mortgage anyway. Try to get as long as an amortization as you can. Find a bank that will lend you an open mortgage and transferable mortgage to keep your options open. If you can’t get an open, start with a 3 year term. You won’t need more than that. |
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Renovations. You need to start improving your property to build up its value. To find how to get the most out of your property, CLICK HERE.
Know where to put your money. Create a budget and shop around. Keep notes. This is where you can save A LOT of money. Spend on products that reflect your neighbourhood. Go to product warehouses for end of the lines, shop on Craigslist.org, peruse all the sales. The work that you put in now doing research, you’ll be able to use for the future. Try and do as much of the renos as you can…to save money. Must remember to make sure the renos are done well. Nothing says a shoddy house like bad construction. I’ve had clients get turned off by crown moulding seams not lined up and filled. It must look polished.
You must remember that you want to stay very stylish and up-to-date with colour and style, but not over the top. Hire a decorator and/or talk to the paint stores. A lot of times they’ ll send someone over for a sma ll fee. I do my own by going to the library and flipping through as many décor mags as I can. I even take pictures of my favourites. If you see a lot of repeat styles and colours, that’s what you’ll want to go for. As long as you don’t go over (purchase price + reno costs > selling costs), you’ll be fine.
Selling. After you are very happy with the outcome and you are mentally ready, it’s time to either rent it out (you’re already renting the top), or sell one of the two. I suggest studying this idea for a while by doing your research and math. To do this, you’ll need to know these details:
1. Ask a realtor to price out each apartment as if they were sold individually as condos. Meaning, find out how much you could get for them.
2. Find out whether a divided or undivided condo would work the best for you.
3. Know how much you could rent your apartment for.
4. Talk to a bank/mortgage broker and find out your budget for the next duplex/triplex. Get all scenarios:0% down what is the interest rate, 5% down what is the interest rate, 10%… Send them a listing and your financial details to see what they think. Ask them not to submit the information until you have an accepted offer.
5. Do the math.
Here is a math formula to follow (I used made up numbers so you get the idea. Fill in your numbers):
This is my scenario after doing the research above:
- I have a mortgage on my duplex @ $175K
- I could rent the bottom for $1000, heat excluded
- I’m renting the top already for $750 month
- I am pre-approved to purchase another duplex for $450K
Sell top: for $185K, radiate mortgage, rent bottom $1000 = no cash left, +$36K after 3yrs, (+$220K equity).
Sell top: for $185K, don’t radiate mortgage, rent bottom $1000= $185 cash left, +$36K after 3yrs, (+$220K equity).
Sell bottom: $220K, radiate mortgage, rent top $750= $55K left, +$27K after 3 years, (+$185K equity).
Sell bottom: $220K, don’t radiate mortgage, rent bottom $-700=$220K cash left, +$27K after 3 years, (+$185K equity).
Keep both: Rents $+1750, mortgage $-700= $+37,800 after 3 years, (+$220K +$185K equity).
Buying a new duplex:
Buy $400K, $20K deposit, mortgage @4% @30yr amortization. Mortgage -$1807, +(rents $??)= $?? month.
Buy $400K, $0K deposit, mortgage @4% @30yr amortization. Mortgage -$1902, +(rents $??)= $?? month.
Buy $400K, $100K deposit, mortgage @4% @30yr amortization. Mortgage -$1427, +(rents $??)= $?? month.
Now add the two scenarios together to get the best money making formula. The scenario that I like is selling the top, keep the mortgage on it, get another place putting $20K down to avoid all CMHC costs, and use the extra money to renovate again. You’ll be getting good rent from the bottom now that you’ve just renovated (this scenario would only work with a divided condo, since you can’t rent out an undivided condo). Also, for the second duplex, you’ll have money to hire more construction help. Less time involved and better quality lifestyle. You already know where to get all the materials. Just repeat the look of the first if it was successful.
Things to do:
- Talk to your accountant. Go over all these scenarios. Adding taxes on top of the formulas might change your mind of the one you like the best.
- Learn the ropes on how to change your property into either divided or undivided co-ownership. For that, you’ll need to talk to your municipality, your notary, a land surveyor and a bank (I’m writing an article on that, so stay tunned).
- Talk to your realtor.
I added this article because I love real estate and educating people on the matter. If you would you like me to work for you, call me 514-402-8444 or EMAIL ME!
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