Multi-Family Investing: Triplex’s
A triplex consists of three individual dwelling units combined into one building, the individual units will typically share one or two common walls. Each unit of a triplex is self-sufficient, meaning each dwelling space has its own respective kitchen, bathroom(s), living room, a separate door to the outside, and its own address or unit number.
Some triplexes are constructed as a triplex, and others might have originally been built as a large, single-family home that was later divided into three separate dwellings.
A triplex is sold as one building, and the owner usually rents out all the units or lives in one unit and rents the other two. In some cases, a triplex owner can live in one unit and have family members live in the other units. Typically, however, a triplex is purchased for investment purposes: to earn rent money.
If you have been looking for different streams of investing, a multi-family investment property is definitely an option to consider. Multi-family investments offer 3 potential streams of revenue that include, cash flow, principal paydown and equity appreciation over time.
A building with more than four units is considered by most lenders to be commercial real estate and thus, requiring a commercial real estate loan – which has a very different set of loan terms than a residential loan.
A triplex, because it has fewer than five units (as does a duplex and a fourplex) qualifies for a residential mortgage loan. Buildings with five or more units will almost always be financed with a commercial loan.
Typically, a commercial loan will have a shorter amortization and the loan is based more heavily on the property’s net operating income, while a residential loan is based more heavily on the creditworthiness of the applicant. It is best to consult a mortgage specialist that understand the nuances of multi-family investment financing and knows which lenders offer the best terms for these types of purchases.
Some investors opt to manage the property themselves, while others will hire a property management company to take care of the building. A property management company will take care of the property maintenance, tenant inquiries, unit turnovers, and the day-to-day operations of the property. The benefit of hiring a property management company is that you can sleep easy knowing that your investment is being taken care of and don’t need to worry about handling any issues/problems that arise.
Most triplexes are built in residential neighbourhoods, offering tenants what condominiums cannot – a private entrance that exits into a residential neighbourhood, instead of busy downtown traffic. Multifamily homes are perfect for downsizers looking to rent, multigenerational families that wish to live in close proximity to one another, young families or couples seeking to reduce their monthly living expenses, or elderly people looking to downsize but stay in the same neighbourhood or area.
If this type of investment interests you, feel free to check out our current projects coming to market this year: https://sharpeindustries.ca/all-projects/ .
If you have any questions related to real estate investing, please feel free to reach out to us.