Podcast 18: Triplex conversions as real estate investments
Podcast 18: Triplex conversions as real estate investments
Doug Ford just recently announced his plan for more housing. We need 1.5 million houses in Ontario in the next decade. And traditionally that's 150,000 units per year. In 2021, we've delivered 100,000 housing completions, but that’s an all-time high. We’ve typically only built around 40,000 to 60,000 units per year. So we need to be super aggressive on building these homes. Today, we are going to be talking about how to convert single family homes to triplexes, and why you should.
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Guys, welcome to another edition of Broadview Table Talks. Today we're gonna be talking about something cool because, um, Doug Ford just recently announced his whole, uh, plan for more housing. We need 1.5 million houses in Ontario. Mm-hmm. in the next decade. And traditionally that's 150,000 units per, per year.
Mm-hmm. . And traditionally we've delivered maybe at most a hundred thousand, like, but mostly it's like around 40 or 60,000 units. Yeah. And it's been a while since we've hit a hundred thousand too. That's exactly it. Yeah. So it's gonna be super aggressive and we're gonna be talking about how to convert single family homes to triplexes and why you should.
Mm. Very cool. So let's go for it. All right. Um, you have any questions? , how do you get started? What, How do we do. Well, I mean, have you seen any clients do it? I have seen one. Uh, my favorite example is actually right on my street. Um, and I live in the Plato State Staff fourth area. Nice. They took an old house.
Uh, last document was there for about 40, 50 years and they tore it completely down, gutted it, and built a bespoke home on it. Um, the main living unit has like a four plus one five washroom configuration. It has an over 800 square foot basement apartment. That's two bedrooms. There's still two car parking.
But what they did was they built a, uh, two bedroom apartment right above the parking garage. Oh, no way. So ADU as well, Accessory dwelling unit. Yeah. So I mean, the, the property barely has any yard space, but it has so much living space. How many units again? Three. Three totals. Um, it, it honestly looks fantastic.
I did the whole walkthrough and tour and everything, and, uh, it, it makes at least 65,000 gross in rent. It's gotta be more than that. It was last year, so it's gotta be more than that with the 20% increase year over year. So 65,000, That's like, what? 2000? No, it can't be. It's gotta be way more than that.
It's way more, Yeah. Yeah. So it is like, especially now, now that, uh, rent has increased so much. It's, it's honestly a fantastic investment. Cause that would be like six grand, um, a month, pretty much. Mm-hmm. . Right. No, actually that's not five grand a month between three units. Yeah. So it's gotta be more than that.
It's gotta be like at least, Oh, sorry. So that, that calculation was based on the primary homeowner still living in the main unit, the rental. I see. Additional 60,000 additional income versus additional zero. Exactly. So it's pretty amazing. Um, how do you feel as a neighbor having that in your backyard?
Honestly, it hasn't really affected me. Um, there's always been a lot of traffic in my neighborhood anyway, because I'm right by tape station. Um, so I haven't really noticed that much of a disturbance. And of course, once you start introducing every single, um, lot as like a tripex, then yeah, maybe you'll see more people.
But honestly, it's a family oriented community. Anyway, you, you want to see people, you want to make sure that there are people around you. That's why you live in the city. Well, that's the reason why you pick. Play states in that area. Right? Because you be so close to the blue down fourth subway station.
Yeah. And you're close to all the amenities and all the stuff around there, as opposed to being in the suburbs where you get more space. Exactly. But it's quiet when you're out in that like six o'clock at at night and there's nobody around you. Nice, Nice. So the reasons why you'd want to have, first of all, multiple units versus single unit is because you get the variety of tenants, right?
I mean, you get a variety of income sources. Mm-hmm. . So if one tenant leaves, you're not gonna have as much vacancies. You'll have a third of the vacancies as opposed. A hundred percent of vacancies. Exactly right. And then, um, as the tenants move in and out, then you have opportunities to kind of increase it to market rent.
Mm-hmm. as, um, as they kinda refresh, Right? Yeah. Not all of your eggs are in one basket, so if you do need to do anything, you can actually repair or even upgrade individual units when a tenant leaves. Correct. It's just a good way to maximize the number of units that you have or number of revenue sources.
I guess diversify, I guess is the best way to say it. Of course that comes with his own challenges as well too. If you have three tenants to deal with, that's two other tenants that mm-hmm. potentially can contribute more noise. There's fighting between temperature. Mm-hmm. if you have a single source of, uh, heating or whatever, and you also have, uh, noise complaints and things like that.
Mm-hmm. too much density and all that. Yeah. But I think it's a great way, especially if you have, so say you take a single house, You have a detached garage structure. You create a, a garden suite. Mm-hmm. or some sort of, um, laneway suite. Mm-hmm. , that's one on its own. And then you separate the basement from the up main two floors.
Mm-hmm. , or you can take it even step further and have two units, so three units, and then additional unit. But that actually gets into having to change zoning issues, minor variances and things like that. Yeah. And maybe even development levies, which could be an excess of, you know, 60, 70, 80, a hundred grand depending on the unit size.
So I think what Duck Ford's done has been beautiful, I think is a great thing if it goes into, So now it's, if you guys don't know what's happening, um, basically instead of having to change through zoning, get permission for zoning, as long as you don't change the footprint of the size mm-hmm. , then you can just go straight to building permits.
Mm-hmm. , ah, okay. That was my question. Right. So you said you still have to get billing permits? Yes. So it starts to comply. It still has to, um, you know, get architects, drawing structure loads, things like that. Fire, fire safety. Yeah. Fire safety, fire separation. Things like that. Um, but at least now it's less intensive and it's pretty quick to do it, or it's much quicker than much having to rezone and go through having your neighbors object to it, even for that matter.
Right. Yeah. The minor variances. Yeah. So do you guys think you can commit to anybody to, uh, do you know of anybody that would want to convert single family to triplex? I. My dad would love to in Vancouver, but he always talks about, um, doing this, they have the laneway housing, but in Vancouver. Yeah. Okay.
Yeah. Yeah. But not this. Yeah. I mean, people have always wanted to do this, especially families who want to pull a little bit more money out of their, their land that their house is sitting on. Mm-hmm. . So this has always been a conversation now that it's been a little bit easier or made a little bit easier, I think it's no longer a conversation of how to do it, but.
Right. Right. You know, it's, especially with, well, he still, how he still got, still how, yeah. Still need to connect him with, uh, the builders and, and the Right, um, you know, engineers, engineers and everything. But it's become a lot easier as a conversation. It's less intimidating to get started. Well, I don't know if you guys have it or not, but like in my experience, I have some people that want to buy a single family home.
A single family, meaning like, it doesn't have to be detached. It can be like a semi, or it could be even a townhouse. You could still do this on townhouses. Mm-hmm. . Uh, but they, they can't make that jump from, you know, one plus 10, one bedroom condo or renting even for the matter mm-hmm. and going into a house without having separate income.
Mm-hmm. . Right. So this is, I fit into that category. That's what we were been talking about yesterday, right? Is I, if I was to buy a house to actually live in mm-hmm. , it would have to have some kind of income property. Well, yeah. So you're not paying for all the taxes yourself. You're not paying maintenance, utilities, all that kind stuff.
It's like, I guess in the theory, you're paying for the utilities. If you have more people, then you're gonna pay for more utilities, of course. Right. But at least it would help offset some of the taxes For sure. And some of the caring costs. Yeah. And if you got a large enough footprint where you can actually have two tenants and then you guys take one main floor, That'd be huge.
Yeah. Actually I wanna do that for the office too. That'd be awesome. Right. You know what I mean? Have like, uh, main floor tenants, whatever. We have the upstairs office all the way around. Yeah. In a residential area, it's like the cheapest thing to do. Yeah. And then I guess the other thing is there's some tax implications along with, um, with that, Right?
So I think if, if you occupy. Less than half of it. It doesn't count as primary residents anymore. I think. You don't get the primary exemptions. Don't check with the accountant to make sure, but I'm pretty sure that's the situation. Yeah. And then I guess financing becomes a little more expensive because it's not your primary residents anymore.
Right. So, and then you have insurance implications and things like that. Mm-hmm. . Yeah. That's, I think it's great. Still worth it though. Yeah. If like, you, you have to make the math work in your favor because this is also like a gateway of becoming a, a landlord. Mm-hmm. . Yeah. And building your wealth. Um, you know, because, you know, while, while this property might be your primary residence, now further down the road, you could leverage that into something bigger that is your primary residence in Rinse and repeat.
Yeah. Or we can have in-law stay there as well too. Or we can keep it as like a, like, there's so many different use cases for multiple dwellings, multiple unit properties. Office space, like a, a separate space just for you to like, you know, studio space, creative space, whatever it might be. Right. You might rent that out to a separate person.
You can have additional rental income. You can have, you know, your kids live there while you're age in place. Mm-hmm. , or you can have in-laws that are helping you out while you're raising kids, right? Yeah. Like so many different options I think. Yeah. It just makes sense and I've always wanted to own one as well, actually.
I do own them thinking, but I mean, I've always wanted to live on one and have tenants downstairs. I've never lived with other tenants, which that I've owned in, um, that I would love to have. But it just makes so much more sense, I think, And I feel like it's the only solution. Yeah. For the affordability crisis.
Right. What else can we do? Yeah. Right. Yeah. I mean, at the end of the day, it just comes down to supply and demand. Yeah. To control prices. Right. And then if you look at an average price of a downtown condo, you're looking at 700 and something thousand, seven, 30,000, I don't know, whatever it is right now.
680, 6 90 plus a minus 700,000 for an average condo. Yeah. Yeah. What if you got the cost of building that down to 400,000? Right. By the time you, you know, Do some renovations, it might be like 200,000 or whatever. Mm-hmm. and then maybe additional cost for what it takes to actually get that structure.
You're probably looking about $400,000 a unit. Mm-hmm. drive into three. So 1.2 million for a, a tripex maybe. Well, depending where you go, probably look at depend and the neighborhood and the line value. Exactly. Exactly. So, uh, okay, so let's take a, use the case of a 2 million property and you cut that into 1.75 million property.
You cut that into three units, two 50,000 plus non transfer tax, actually not including non transfer tax. I transfer taxe, not transfer taxes, because if you buy a single family condo, you still pay those, not transfer taxes. Yeah. So, um, okay, so 1.7 5, 2 50 for the build and renovation. Then you're looking at divided by three.
Was that a 633,000? That's still cheaper than a single family. Yeah, a single condo. Single condo, Average condo, You could probably get two bedrooms outta that. Mm-hmm. . Mm-hmm. , two bedroom condo, You're looking at minimum 900,000 in Toronto. So there's economies of scale there and operations as well too. You hire one landscape, but you don't have to pay maintenance fees.
Mm-hmm. . Yeah. One roof to change. Right. Like, you know, snow shoveling and all that kind of stuff. Yeah. Yeah. And for families too, they don't necessarily wanna be like right in the middle of downtown Toronto. They wanna be in a neighborhood with a back potential back care space. So you share schools. Yeah, exactly.
Yeah. So I think it just makes sense to, uh, if you can come up with the money for a, uh, larger property to turn to higher density. Mm-hmm. , I think it just makes so much more sense. Mm. . Yeah. Are there cases you think that you wouldn't want to do that? Well, that's when we cross into the NIMBY territory, right?
Where you don't want that many people in your backyard and you don't want your neighbors to have three different families living on the same plot of land. Mm-hmm. , Right? Cause that could also create more traffic. Mm-hmm. more dense aisle. But like it's allowed to do that now, so they can't say anything about it.
Yeah, yeah, yeah. But as an investor, you know, sometimes it might be better to not cut up a luxury home into three units. Maybe it's better to rent out to a single family. maybe potentially has more resources if they could for theoretically the higher rent mm-hmm. . Right. And not have to damage the place into three units mm-hmm.
and keep it as a single family. Yeah. Because there's some people that aren't looking for a smaller unit in luxury neighborhoods. Mm-hmm. . Right. You know, like, um, like certain houses on, uh, in the bridal path, you wouldn't want to cut those up into multilevel. Yeah. That wouldn't even make sense. It wouldn't, People there, they wouldn't, There is, there's a con bra path.
Yeah. On one post road. You wouldn't want to cut up an existing house yet? Maybe we haven't reached that point yet. I think it would depend where, like the bridal path, the people that are buying those houses, they're not gonna wanna share their house Exactly. Depending on, on the Danforth or places like that.
I think there's a lot of families that can't necessarily afford like a single detached, that still wanna be in that area for a multitude of reasons. Mm-hmm. . Right, right, right, right. And I guess. Speaking on that line, um, like considering those condos in Rosedale, like there's like large mansions that turn into like a five unit condo, for example.
They, condo wise, it, that's, Oh, have you seen those? Like there was a trend for a while in like Little Italy and things like that where they would take. Um, a detached place and then make it into an a and b and actually section actually know, I have seen, I've seen that even in, uh, High Park area. Right. Yeah.
Right, right, right. But in Rosa, cause they're larger houses. Yeah. They cut it into like actual different floors and some, the floors would be into two units. Right. Actually make it a condo unit condo or something. I mean, the one development on the corner of, um, what was it, Glen, and I can't remember what that side street was, where the bus stops in front of it's, it's like a six apartment building where a house used to stand on the corner. Okay. And there's a variety of townhouses and apartment buildings and I'm like, Yeah, you know what? That works for some people because Oh, right in the beginning, right near Blue Shore Born area. Yeah. Just north of Blue Sherbourne. Yeah. Yeah, exactly.
Yeah. So it does work in certain areas, especially if you're close to say TTC or at the bus stop. Yeah. Um, and not everybody wants a full house or the responsibilities that come along with it, but they want to live in the neighborhood. I feel like people that live particularly in downtown areas, they're prioritizing neighborhood over other things.
At least I know that for me. Yeah, of course. Especially with kids, you, you definitely wanna have a good neighborhood to raise your kids and if, if you're just by yourself, you don't have kids, then of course, or a partner or whatever, then you wanna be you. Convenience, as opposed to, And they're willing to sacrifice on maybe other things like space.
Mm-hmm. , Right. So That's right. And it's affordability at end. And affordability. Yeah, for sure. Right. So most people might. Get in and have one basement apartment or, or upstairs apartment, whatever, and then rent that out to help offset some the cost until the mortgage is paid down to grow some more equity into it, and then you can convert it back to single family.
So yeah, I think it's a good thing for Toronto or Ontario for that matter. I think it's a good thing for our housing market. Mm-hmm. and, um, yeah. Yeah, so much needed flexibility. It's, uh, something that we've been complaining about for a while. Yeah. I guess the only challenge is now if, So the big caveat in order to do this, as of right, is that you can't increase the footprint of the space other than accessory dwelling units, which is the garden suites and the Laneway suites.
Mm-hmm. . Yeah. If it's the actual main house and you wanna make into three units, you can't do an extension without going. Through the zoning approvals or minor variances, right? Mm-hmm. . Yeah. Um, so I think if we ever got, loosen that part of it, then it would be so much easier and there'd be so much more density here and there'd be, so this city would be beautiful and it'd be affordable.
Finally, . So one day we can hold. Depends all for the development. Well, I, I'm, I'm all for density. Like, I, I like being in New York North, you know what I mean? Mm-hmm. In new. The, the New York of Canada, You know what I mean? I like that. Like, I like having diversity, I like having culture. I like having love it options.
You know, I don't want in a small town. Yeah. So, um, the more density, the better. I'm a yb, My last name's Yem, but I like to have yb, you know what I mean? Like yes. In my backyard. Yeah. Because I welcome it. Yeah. There's big challenges. Like, um, you know, like I had a house, I have a house on Lee side, but like when I was living there, , I saw Young and Edmonton change.
Mm-hmm. from being a nice residential, quiet area to now all the tall towers in there. Mm-hmm. . And I see the challenges come with it. Like, you can't park anywhere. There's so much traffic when you're walking along the sidewalks. It gets so busy that you can't even just, you have to like, you know, wait for people to pass you, Right?
Mm-hmm. . Yeah. So, yes, that kind of sucks. The schools overcrowded. Mm-hmm. , like there's a lot more noise and all. I love it. Yeah, I love it. I don't know. I love it. That's part of living with a big, in a big city. It's inevitable. Yeah, It's inevitable. It's gonna grow. It's a big city. Like you, you, you want to, you, you can make a choice.
Either you live in the city and live the city life or you move out to where it's a little bit quieter. Yeah. And that's like goes back to. If we do this like lane way house is gonna cut down on yard space, but when you live in a city, the city is your backyard. That's how I look at it. Yeah. Right. And that's when you go to a park.
Exactly. True. Yeah. True. And the, the folks at uh, City of Toronto, Parks and Recreation, they're doing a wonderful job. Yeah. Using our tax dollars to create great green spaces for that. But actually we use, uh, parks a lot actually. I really like the parks. Yeah. Yeah. The excellent playgrounds. Excellent. Uh, waiting pools.
You know, trees are great. Dog parks. Yeah. Dog parks. Yeah. True, true, true. Yeah. Well, okay. Well I guess that's another topic for another day. about density in Toronto and a growing city. Yep. But these are the challenges we're faced with, and this is what's happening in our city. Mm-hmm. and I welcome those changes.
So looking forward to seeing what happens out of it. Cool. If you have any questions about converting a single family or investing in a single family, turning into triplex and seeing how the numbers work gives us a call. Actually, you know what, before we do that, before sign off, I wanna give a quick, um, overview of all the different expense categories that you can.
Actually know what, Give a call if you wanna hear about that . It's too much. All right, see you guys. Okay, bye. Up.