If you’re looking to purchase an investment property with a few doors, you have options. In this piece, we’ll discuss the pros and cons of buying two triplexes versus one sixplex – same number of doors, different situation. So, what’s the difference?
What level of financing can you expect?
Let’s start with the two triplexes. First of all, you can finance both of them residentially, which means that the financing will depend directly on your income level. It doesn’t matter how much the building is actually bringing in: while that will be considered, it’s not the main variable.
For the sixplex, generally speaking, you will have to get commercial financing. That means that the bank will be looking at the revenue your property is pulling in, as well as the associated expenses. Then, they’re going to calculate the economic value of the building and will lend you a sum based on the result.
So, it’s a lot more math, and generally speaking, you will receive a lower amount from the bank than if you had financed it residentially. RBC and Desjardins will typically go up to six doors and eight doors, respectively, on the residential side. But those are the exceptions as opposed to the norm.
Which investment is safer?
The difference between these two investments lies in the structure, the roof, the windows, the foundation – all common areas of the building. If you have everybody in one building, you have one roof. You don’t have to worry about replacing two of them when the time comes. If you have a foundation issue, you’re only looking at one building’s foundation versus two.
So, the more you can keep your costs limited to one building and have more tenants within that building, the better economies of scale you’re going to have and the more financially prudent your investment will be.
There are so many variables to consider when making an investment of this kind, and those factors will influence your final decision. However, if you can keep everything streamlined into one building, that’s always our recommendation.
This is a complex topic that has so much more to be uncovered – if you’re considering a property investment like this, reach out to our team and we’ll be happy to get into the details with you!