Multi Units for a principal Residence?

[vargam3]

Hello, I have been searching the forum but haven't been able to find an answer to my questions.

I was wondering if you are allowed to buy a multi unit building as your principal residence to take advantage of the 5% down payment option?



If this is possible is there a limit to the amount of doors that would be acceptable under this strategy?



Thank you for any advice.

 

[MarkTorgerson]

I bought a 4-plex years ago and lived in one of the units. I was able to purchase at 10% down using this method. Once you get any larger than a 4-plex, you get into the commercial world with an entirely different set of lending guidelines. Hook yourself up with a good mortgage broker who will be able to guide you through the financing.

 

[JoshOttawa]

Definitely possible (or it still was in 2012). It does depend on the size as previously mentioned. I purchased a triplex in 2010 with 10% down (moved into one unit) and a duplex in 2012 with 5% down (moved into one of the units). At the time I was advised by my mortgage broker that for a duplex 5% was doable, and 10% for a triplex or fourplex. As mentioned before, above that you are tinkering with commercial financing. Of course the financing market continues to evolve so I second the advice to talk to a mortgage broker about options.



Josh

 

[vargam3]

Oh great to hear. Thank you for the advice. I have been travelling around the world for the last 3 years and its time to come back and get settled into the real world. So just trying to figure out what my strategy should be for my first investment property. I definately think getting a multiplex that I also live in and manage is a great way to introduce myself to real estate investing.



Did you guys have any problems or concerns with this strategy?

 

[TangoWhiskey]

This is a very very smart strategy that if I was to start over again I would have used. Although I wouldn't manage it myself and never let the other tenants know I own it. But if you decide to manage it yourself then you could buy building after building, another one each year or so, or if you really wanted to leverage it buy and live in one while purchasing one that needs lots of work to move into as the second and so on.

 

[JoshOttawa]

Sorry for the delay. Missed the replies. At this point, 3 years in, I am happy with my decision to approach things this way. It's given me a real hands-on feel for the business. A couple of things I learned along the way...



1. Your neighbours that share walls/ceilings/floors with you are also your tenants. This requires careful relationship management as it is important to treat them as your tenants, in a very professional manner, but at the same time keep in mind that you also have to live with them. Normal neighbourly disputes could quickly end up at the Landlord Tenant Board.



2. It is important to keep the end goal in sight. For example, it is fine to make some upgrades to units you are living in, but if you aren't planning on staying there long term, keep in mind who will be using it. Perhaps the most expensive dishwasher isn't necessary. Do I really need to put in hardwood or will a decent lamanent be a better fit? Obviously this depends on your target rental market.



3. Taxes become a little complicated when you are living in part of the property for part of the year, and the personal residence exemption and capital gains/depreciation needs to be sorted out. Definitely advise having an accountant familiar with investment property.



4. It also gave me the chance to learn the parculiarities of each property like which pipes have a propensity to freeze in the winter, that the hot water tank labelled Apt#1 is actually connected to Apt #3, which outside power outlets connect to which apartment, when your tenants are smoking pot in the living room where the upstairs apartment will smell it, etc.



This experience has given me a good understanding of how property management works, given me an opportunity to try my hand at some renovation projects, and allowed me to pick up a couple of investment properties before buying my own house. I felt way more confortable investing in a property and having tenants for the first time when I could keep an eye on it every day. It also makes it a lot easier to arrange viewings of the other apartments. Overall, so far, so good.