A small plex can have big benefits

Single-family homes are rare and expensive, especially for a first-time buyer in the Greater Montréal area. But is that a reason to abandon your dream of home ownership? Not at all!

A financially attractive option is available to first-time buyers: the small plex, with two, three, four or five units.

The small plex offers several advantages:
• You are housed at a lower cost because your rental income covers a large part of your monthly mortgage payments.
• In a few years' time you may decide not to live there anymore and rent the property.
• The current housing shortage reduces the risk of having to deal with empty units.

Of course, there are also some disadvantages:
• You have to manage tenants.
• You have to be aware of the laws and regulations surrounding residential tenancy.
• And you have a little less privacy.

In or outside Montréal?

Yes, plexes in Montréal are expensive. Off-island, they are certainly more affordable, but the rents you'll collect will also be lower. You must also think about your lifestyle. If you work in the city, will you have increased travel costs? To find out which option is the most advantageous, you need to calculate everything.

What capital outlay?

As with the single-family home, whether the plex has two, three, or four units, you will need a 20% down payment to obtain a conventional loan.

But it's a different story if you plan to live in one of the units. The future owner-occupant has the option of purchasing mortgage loan insurance, with Canada Mortgage and Housing Corporation, Sagen or Canada Guaranty, to reduce the capital outlay.

In the case of a duplex, you will need only a 5% down payment for a purchase under $500,000. If the purchase price is higher, you will need to put down 10% of the portion exceeding $500,000. For a triplex or fourplex, you will need to advance 10%. Note that obtaining homeowner's loan insurance is only possible if the property you want is worth less than $1 million.

The rules are different for a fiveplex because it is classified as a multi-dwelling property. Whether or not you live in the building, the minimum down payment required will be 15% of its economic value—not its market value—for an insured loan and 25% if the loan is uninsured.

In conclusion, a professional tip

Starting your homeownership life with the purchase of a plex is a wise way to build your personal wealth. In a few years, you will be able to refinance your plex in order to make the necessary down payment to buy the single-family home of your dreams... You will then own two properties and will continue to collect rent every month!

Patience can pay off...