Buying a House with an Apartment / Duplex

Unlocking the Benefits of Buying a Duplex or House with an Apartment

Are you interested in understanding the advantages of buying a duplex or a house with an apartment? Exploring this topic can provide valuable insights for your real estate journey. Let’s dive into the world of duplexes and houses with apartments, discover the key differences, and unveil the potential benefits of these unique properties.

What is a Duplex or a House with an Apartment?

At its core, a duplex or a house with an apartment is a multi-unit property housed within a single building. These properties typically consist of two separate living spaces, which can be side-by-side (horizontally) or stacked on top of each other (vertically). The critical distinction here is that these properties have one owner.

Each unit within a duplex or house with an apartment has its own separate entrance, ensuring that tenants can come and go without interfering with one another. This separation creates a harmonious living environment where residents maintain their independence.

A classic example of a duplex can be found in the 1950s-style detached bungalows, which often have a side entrance. Over the years, these bungalows have been divided into two units, creating distinct living spaces in a single home—one upstairs and one downstairs. Typically, these units are of similar size.

Here’s the crucial point: whether you call it a duplex, a granny suite, an accessory apartment, or a legal apartment, the name doesn’t matter. What’s essential is the presence of two separate units within a single property.

Distinguishing a Duplex from a Semi-Detached Home

A semi-detached house, often referred to as a “semi,” differs significantly from a duplex or a house with an apartment. Semi-detached homes consist of two individual houses connected by a shared common wall. Crucially, they have separate owners and separate lots.

On the other hand, a duplex or a house with an apartment is a single property with two distinct living spaces under the ownership of a single individual. These properties are commonly used by investors or individuals looking to rent out a portion of their home. However, when you own a duplex or a house with an apartment, at least one of the units must be rented; it cannot be sold.

Semi-detached homes offer an appealing alternative to detached homes, providing homeowners with property ownership, a yard, and a similar size to what detached homes offer, all at a more affordable price.

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Converting Your Home into a Duplex or House with an Apartment

In the past, it might have been possible to convert a single-family home into a duplex or a house with an apartment without many legal barriers. However, things have evolved, and today, the process is more complex. Converting a single-family home into a duplex or a house with an apartment involves considerations of safety, building codes, and careful planning.

In my hometown of Guelph, a university town, this is a particularly relevant topic. In areas near the university, some homeowners have been creative in their approach to student housing. However, it’s not uncommon for real estate agents like Jesse and his brother to come across homes with 6 or 7 bedrooms that are clearly deemed illegal and pose significant safety hazards.

Moreover, in case of a fire in an illegally converted house, the homeowner’s insurance might refuse the claim, making it a risky venture for everyone involved.

Before adding a secondary unit to your home, it’s crucial to consult with the City of Guelph Building Department. Jesse and his brother have personally created a legal basement apartment in their own home, and their experiences have become a valuable resource for others, often referred to as “house hacking.”

Understanding Legal Non-Conforming Duplexes

A legal non-conforming duplex is a unique situation where the use of a property does not align with the current zoning by-law. However, it was permitted under a previous by-law when the secondary unit was initially created.

For example, if a house was built in the 1920s and divided into upper and lower units in the 1960s, it may have two kitchens and a shared entryway at the front. This property has been used as a rental for decades. Yet, it would not meet the current by-law or building code standards. In such cases, it is often referred to as “grandfathered.”

It’s essential to note that changing the layout of a legal non-conforming unit can nullify its status, and it must remain as is. To be sure, it’s wise to obtain confirmation from the municipality that a property is indeed legal non-conforming, which may require a paper trail of City approvals at the time of conversion.

Exploring Triplexes: A Step Beyond Duplexes

As the name suggests, a triplex is a three-unit property owned by the same individual. However, triplexes are far less common than duplexes.

A triplex consists of three separate units within a single building, with tenants often sharing one or two common walls. Each unit in a triplex is self-sufficient, having its own kitchen, bathrooms, and living space.

Personal Anecdote: I once had a colleague who lived in a triplex. It was a charming old building with three separate entrances, and she enjoyed the sense of community among the tenants. However, as she explained, not all triplexes are created equal, and the layout can vary significantly.

Triplexes usually have a separate door to the outside and their own addresses or unit numbers. In certain residential zones in Guelph, triplexes or larger properties were not initially permitted. However, with the Ontario Homes Built Faster Act, options like triplexes and tiny homes may now be a possibility.

Pros and Cons of Buying a Duplex or House with an Apartment

If you’re contemplating the idea of purchasing a duplex or a house with an apartment, it’s essential to consider the pros and cons to make an informed decision.

Pros of Owning a Duplex or House with an Apartment

  1. Larger Mortgage Qualification: Lenders often consider the potential rental income when qualifying you for a mortgage, which can enable you to qualify for a larger loan.
  2. Entry into the Market: In a competitive housing market, these properties offer an affordable entry point into homeownership, allowing you to start paying off a mortgage.
  3. Long-Term Benefits: Think of a duplex or a house with an apartment as a 3-5 year plan. They enable you to build equity, pay down the mortgage, and potentially transition to the next phase while keeping the property as an investment.
  4. Additional Cash Flow: With rising rent prices, these properties can be a consistent source of rental income, providing financial stability.
  5. Tax Benefits: There are tax benefits related to the rental portion of the property, covering mortgage interest, repair, utility, and insurance costs. Consulting with your accountant is advisable for a more in-depth understanding.
  6. Airbnb or Short-Term Rentals: The fast-growing market for short-term rentals, including services like Airbnb, can be lucrative, and the proximity to your rental units can be a significant advantage.
  7. Landlord Experience: If you’re considering real estate investment in the long term, owning a duplex or a house with an apartment can provide valuable experience in becoming a landlord.

Cons of Owning a Duplex or House with an Apartment

  1. Becoming a Landlord: Being a landlord can be both a pro and a con. It’s not a role for everyone, as it requires an understanding of landlord-tenant laws, comfort with the Ontario Standard Lease, and tenant screening. Some prefer to have a personal connection with their tenants.
  2. Repairs: Depending on the age and condition of the property, you may need to undertake repairs. Ensuring you have the necessary funds and conducting proactive maintenance is essential to preserve the value of your investment.
  3. Limited Locations: These properties are not prevalent in all areas. Certain neighborhoods may not have any, so consulting with a knowledgeable real estate agent is advisable to find the best locations.
  4. Appreciation and Demand: These properties may not be the first choice for every homebuyer. They might stay on the market longer than the average single-family home, as not everyone desires this type of property.
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Is a Duplex or a House with an Apartment a Good Investment?

The answer to this question depends on your specific goals and plans. It’s essential to determine whether you intend to live in one unit and rent the other or if your goal is to buy the property as an investment and rent both units. This decision should be your first step.

I have a friend who invested in a duplex as a way to break into the real estate market. He lived in one unit while renting out the other, and it has proven to be a wise decision, with the rental income covering a significant portion of his monthly expenses.

If you’re buying a duplex or a house with an apartment as an investment property, you’ll need to do more homework. Ensure that it’s a legal property and not two units that are illegal.

How Do You Know If a Property Is Legal or Not?

The distinction between a legal and an illegal property hinges on whether the municipality has inspected and approved the property as a multi-unit home. This approval involves assessments by professionals to ensure safety, electrical and plumbing compliance, and inspections by the local government.

Personal Anecdote: Another friend of mine went through the process of legalizing a previously illegal property. It was a substantial effort but proved to be an essential step in ensuring the safety and legality of the property.

Determining whether a property will be cashflow positive at the price you’re willing to pay is crucial. “Cashflow positive” means that the rent you’ll earn is sufficient to cover all the costs of owning the property on a month-to-month basis. To achieve this, you need to be honest with yourself and include all ownership expenses in your calculations, such as mortgage payments, insurance, repairs, taxes, potential vacancy, condo fees, and utilities (if applicable).

Personal Anecdote: I once had a colleague who was determined to invest in a duplex in Guelph. He spent considerable time crunching the numbers, factoring in all possible expenses and rental income. This thorough approach was key to his success in making a wise investment decision.

Finding Duplexes or Houses with Apartments in Guelph

Duplexes and houses with apartments can be found throughout Guelph, but you’ll discover a higher concentration in specific areas. For instance, the Old University neighborhood, situated conveniently between downtown Guelph and the University of Guelph campus, is a prime location for these properties. This area caters to students and offers numerous rental opportunities.

Personal Anecdote: I’ve explored the Old University neighborhood in Guelph, and it’s a charming area with tree-lined streets and historic homes that have been creatively adapted into duplexes. The proximity to both the city center and the university makes it an attractive choice for renters.

Additionally, neighborhoods with homes constructed between 1950 and 1975 are prime candidates for duplex conversions. These homes were typically built as bungalows with upper and lower levels and often had side entrances, making them easy to convert into two units.

In conclusion, understanding the benefits of buying a duplex or a house with an apartment, their distinctions from semi-detached homes, and the potential advantages of these unique properties can empower you to make informed real estate decisions. Whether you’re looking for your next home or considering an investment property, duplexes and houses with apartments offer a unique avenue for both personal and financial growth.

Are you ready to explore the world of duplexes and houses with apartments and embark on your own real estate journey? It’s a fascinating and rewarding endeavor, one that can lead to both a roof over your head and a sound investment for your future.

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