Consider a Duplex for Your First Home or Rental Property

Continued rising house prices coupled with the stress test applied to qualify for a mortgage, makes affordability for most Canadians wanting to get into the housing market almost impossible. Even with interest rates at a historical low, a first-time homebuyer in the Kitchener-Waterloo region is looking at an average purchase price of $566,000 for a home. With only 5% down, this amounts to a monthly mortgage payment of $2475. The average single income in Ontario is $73,00, thus this mortgage payment would take up 40% of a person’s gross income.

Let’s consider a duplex for a first-time homebuyer with 5% down. Duplexes have certainly increase in value over the last year and a half, however if we consider a purchase price of $700,000 with 5% down, this amounts to a mortgage payment of $3060. However, in the KW market where the cost of rental properties continues to skyrocket, if a homeowner could rent out their duplex for $1800 (upper unit) and $1400 (lower unit) the cost would be close to being cash flow even after property taxes. Even one of the units could be rented taking the mortgage cost down to a more affordable payment. To take it a step further, I have had several clients in the last year who have taken a current home, or purchased another property and converted them from single family dwellings to duplexes. The advantage of this would be acquiring a property at a lower cost (you pay a significantly higher price for a duplex). The downside would be construction costs, and time/costs to apply for necessary permits and inspections to complete the work.

All things considered a duplex, or triplex, seems to be a good way to get into the housing market from a cost and cash flow point of view! An added bonus is that if the property is a legal duplex, Lenders will take rental income into consideration in qualifying a client for a mortgage.


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