Duplex conversion is a real estate investing strategy that involves converting a single-family apartment into a Legal Secondary Suite.
A legal secondary suite is an apartment 100% separate from another in the same physical building, created with approved city permits. It is also called an in-law suite, accessory unit, basement apartment, Duplex, or Two-Family Dwelling.
Savvy investors take advantage of this strategy to increase monthly cash flow as rents for single-family homes do not cover all monthly expenses (Mortgage, Property Taxes, Insurance, etc.)
Secondary Suites are also a necessary addition to the housing stock to provide affordable housing to many quality tenants looking for homes.
This strategy has been described by many savvy and successful investors as the #1 investing strategy in Canada because one duplex can give an investor multiple income streams.
There are many moving parts involved with successfully executing a duplex strategy, and we’ll discuss 4 of them in this article.
1. Finding a Good Realtor
There are many realtors out there, so you want to make sure that you’re using the right person focused on what you’re looking to invest in. For example, if you’re looking for apartment buildings, use a realtor experienced with apartment buildings.
2. Finding the right property
Before purchasing a property for a duplex conversion, consider the following factors:
- Purchase price of the property
- Location
- Tenant profile in that location
- Rents in that location
- Renovation costs
Make sure you calculate the numbers to see if everything fits your budget. We discussed calculating the numbers using our cash flow calculator in our previous video.
3. Knowing the Bylaws
Bylaws differ from city to city, so an investor must be familiar with the city’s bylaws when the duplex conversion is being done. Some of the significant bylaws we look out for are:
- Parking: This is one of the big factors determining whether a property is suitable for a duplex conversion. Different cities have different requirements. It can be front to back (tandem) or side by side. However, side by side is preferred as it minimizes tenant interaction and disputes.
- Zoning: This also differs from city to city. First, however, the investor needs to ensure that the property is in an area where secondary suites are allowed. For Hamilton, we use www.maps.hamilton.ca
- Egress: Each unit needs two ways in/out for fire safety. Typically the second exit is through a window for the basement unit. If a window is not possible, add stairs if budget allows.
- Square footage: Some cities have minimums or maximums. Bungalows are great because the basement is almost the same size as the main floor.
- Basement Ceiling Height: This differs by the municipality, but Ontario Building code standards are ideal.
4. Building the right team
Doing a duplex conversion is so much more than just finding the right house in the right location and checking the numbers. It involves building a team to successfully execute the whole process and turn that one property into other properties down the road.
If done alone, it can also be a complicated and time-consuming process, so smart investors use professionals to leverage time and minimize mistakes.
Required Professionals needed are Realtor, Home Inspector, Planner/Architect, Engineer, Licensed Contractor and sub-trades.
Secondary Suites are a fantastic way to add a solid cash-flowing property to your portfolio. If a Duplex conversion strategy is executed correctly, it can help you almost double your rental income, which means positive monthly cash flow month after month.
With this, you can pay down your mortgage faster, fund additional renovations to increase your property value and qualify for more mortgages.
FREE INVESTOR TRAINING
Want to learn more about how we carry out Duplex Conversions? We offer FREE investor training to teach this strategy in detail.
CLICK HERE to sign up for our next FREE real estate investing class, where you’ll discover:
- How to effortlessly evaluate profitable basement suite conversion properties.
- How to identify and avoid money pits and rookie mistakes.
- How seasoned investors are taking cash out of one property to purchase another.
