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There are few viable options on how to live while avoiding an actual expense for your housing needs. Some options would include living with your parents forever, having no home at all or jail. All of these are to be avoided. Renting or buying comes with a payment, so where does that leave us?

Buy 2 houses combined into one! In other words, a 2 unit property. And I don’t mean get a room-mate, I am talking about a legally zoned property with two self contained units, with their own entrances, separate living quarters, kitchens, etc. You then live in one unit, and rent the other out to a tenant of your choosing. You might ask – “Wouldn’t a property like this cost more?” Let’s examine some real life scenarios from my mortgage business to find out.

SCENARIO #1

You are looking to buy a house. You find a property that you like for $250,000, and you are making a 5% down payment ($12,500). Let’s say that you take a 5 year fixed rate term, and a 30 year amortization to help keep the payment low as it is your first property. Here’s how the numbers look:

If this fits in your budget, then you have found yourself a great deal and you can stop renting and start growing your equity! However, let’s take a look at a few specific examples using both Halifax and Dartmouth as areas of comparison.

SCENARIO #2

Recently I had the opportunity to arrange the mortgage financing for a great 2 unit property in central Dartmouth – the property is located on Hawthorne Street, directly across from Sullivan’s Pond. One of my great Realtor partners – Chandler Haliburton of RE/MAX Nova, had helped our client locate and identify this property as soon as it came on the market. Our clients purchased the home with the intent of living in one of the units, and renting out the other for approximately $950/month.

Hawthorne Street 2 Unit Property

Keep in mind a 2 unit property can still be purchased with a 5% down payment as long as you actually live in one of the units. This mortgage was also structured under the best available variable rate at the time:

While this property was $30,000 more than Scenario #1, the monthly net payment is drastically lower given the rental income. Of course this makes a lot of sense economically, but are these properties hard to find? They can be – if you’re in the market for this type of property, you can rest assured that you are not the only one. In addition this property was in Dartmouth – do the numbers still work on the other side of the Harbour on the Halifax peninsula? The answer is yes.

Let’s take a look at this 2 unit property that another great Realtor partner of mine, Charlene Mills of Exit Realty Metro, has recently sold on Newbery Street in the North End of Halifax:

Newbery Street 2 Unit in North End Halifax

This great 2 unit property in trendy North End Halifax sold for $272,900. While I can not be sure of the specifics of the mortgage details on this property, let’s assume it was also set up with 5% down payment, under a variable rate. The numbers would look like this:

While the price was a few thousand lower, the property taxes were a little higher, however the bottom line payment after the rental income is again considerably lower than the monthly payment on a personal residence with no rental component.

It also is important to note that the last round of government intervention in the mortgage market has increased the minimum down payment on any rental property to 20% of the price, but only of the property is 100% rented out. If one unit is owner occupied, then a 2 unit property can still be purchased with 5% down, while a 3-4 unit can be bought with 10% down as long as one unit is owner occupied.

This strategy is not for everybody as the responsibilities and potential headaches of being a landlord are too much for some people to bear. However for those that don’t mind the potential risks, the financial reward of taking this route can be very well worth it – living in an appreciating asset while someone else makes the bulk of your monthly payment. If this is something that you have ever considered, or are curious about, then give me a call. Our Team has helped many clients purchase property using this strategy, and we will happily provide you with the information you need to decide if this option is right for you.