When out-of-town real estate investors Joyce and Eddie approached Benjamins Realty Inc. about purchasing an investment property in Waterloo Region, they had lots of questions. Their capital on hand afforded plenty of possibilities from a mid-size multi-family building (4-6 units) to a basic duplex investment. We broke down the various options for them and ultimately decided on a duplex conversion.
Why a duplex conversion?
Purpose built multi-family buildings possess ease of management and the advantage of an on-going operation you can generally buy into. The one catch with already tenanted multi-family buildings is that rent returns are almost always below market average while the building itself has appreciated significantly resulting in a negative cash flow with the typical 20% down payment. One thing we’ve found at Benjamins Realty time and again, investors aren’t excited about buying a property that will lose them money at the outset.
A duplex conversion (a duplex is a single building with two self-contained units: See Duplex Guide) generates an excellent ROI once the construction process is completed. It is capital intensive at the outset, but for an investor seeking a very solid return, the wait is worthwhile.
Planning and Execution
Benjamins Realty formulated a plan with Joyce and Eddie. We decided to target bungalows which have a natural up/down layout (basement is roughly the same size as the main floor). Furthermore, we wanted basements with good headroom, locations close to the core of Kitchener and the LRT line, with access to a solid tenant pool. Benjamins Realty also introduced Joyce and Eddie to local contractors who specialize in duplex construction. The key to really making these conversions perform is the quality of unit construction and development, young professional tenants expect a high standard in finishing for top market rent. Together, Benjamins Realty, Joyce and Eddie and the contracting team settled on 60 Belmont Ave. E in Kitchener.
Duplex Investment Property Profile
60 Belmont is a mid-century bungalow in the St. Mary’s hospital district of Kitchener. It’s a neighbourhood that’s core adjacent and surrounded by mature trees, parks and residential housing. With access to a strong tenant pool, it’s an ideal duplex investment location. The house itself featured a side entrance with access to the basement, this allowed for an easy entrance to a basement unit. Plans were drawn up which included opening up the floor plan on the upper level, removing the third bedroom and instead creating a 2 bedroom 2 bathroom unit (including ensuite) with a walkout from the Master bedroom. The project calls for completely separating utilities in the house, in-suite laundry facilities and building two completely separate units with modern finishing and style which appeals to young professionals (the target tenant profile).
Joyce and Eddie are now in phase 2 of the project and finishing off the basement unit which will also be a 2 bedroom 2 bathroom setup. The upper level now completed has leased out above the projected market rate and when both units are rented, the project should return just under 8%. Furthermore, when factoring in the recent sales value on comparable purpose built duplex investment properties with high rent returns, the conversion process will likely have built in an added 65-70k in equity on top of construction costs.
Duplex Investment With Benjamins Realty Inc.
Have you ever considered purchasing a duplex investment property? Waterloo Region is a prime area for real estate investment and often cited as one of the top markets. Benjamins Realty Inc. is uniquely qualified to assist investors in sourcing solid, cash flowing real estate investments. We specialize in duplex conversions and also own residential investment property throughout the region. Contact us today to begin receiving available duplex properties or candidates for conversion.