So myself and 2 business partners have purchased our first investment property in Hamilton. It`s a legal duplex generating just over $500 cash flow per month. The basement is unfinished and has definite potential to become a 1 bedroom basement apartment. Our target market (like most) is young professionls, mature students, family, we definetly won`t rent the unit just for the sake of renting it. Now one of the partners is suggesting that instead of throwing our money into the basement and creating another suite, we save up our own money and collect the positive cashflow for the downpayment for a second property of similar type. I prefer to inject the money into the basement and unlock the potential of approx $1200+ positive cashflow per month. The basement reno is scheduled for a budget of $16,000. The DP on another property would be about $45000. What do you guys think
What you do in this situation?
- Thread starter zorant
- Start date
- Joined
- Oct 10, 2007
- Messages
- 4,733
If you can do it legally and turn the property into a legal registered triplex I`d renovate the suite first. Then finish, get rented, and you should be able to pull out all the funds you put into reno`ing it from a higher valuation with lender...
- Joined
- Apr 26, 2010
- Messages
- 171
I find basement apartments don`t attract the best tenants. They are harder to rent and have higher turnover. It depends on your area and the demand for inexpensive apartments.
First off the previous posters are correct. Is this a legal Duplex now? Could you turn it into a legal triplex? If you can the advantages would out weigh the disadvantages in my mind.
I know you are looking at your positive cash flow on the property but you are missing out on 2 other powerful ways of making money in real estate. mortgage pay down and appreciation which purchasing another property would do.
If it were me I would definitely put the apartment in if I could legalize the property and refinance. The $16k spent and the property refinanced could probably get you another property at the end of the day or closer to it.
Regards,
I know you are looking at your positive cash flow on the property but you are missing out on 2 other powerful ways of making money in real estate. mortgage pay down and appreciation which purchasing another property would do.
If it were me I would definitely put the apartment in if I could legalize the property and refinance. The $16k spent and the property refinanced could probably get you another property at the end of the day or closer to it.
Regards,