For sale: $ 899,000. Duplex located rue Saint-Vallier, in the heart of La Petite-Patrie. Renovated. Year of construction: 1900. Potential gross revenue: $ 33,780 per year.
A dream still achievable, the purchase of a small income building?
“Yes, it is possible,” sums up real estate broker David Tardif, at Royal LePage. But you have to be financially solid to be competitive with other buyers when submitting the offer to purchase. ”
And who are these “other buyers”?
“There are more and more investors who bought large income properties and who are now there,” he explains. It should be understood that they [les investisseurs] calculate that small buildings are easier to buy and sell than a 25-unit building. ”
Result: a young couple who aspires to become owner-occupant – and who intends to rent the accommodation located on the second floor, in the case of a duplex – faces “competitors” who do not have the same interests and, above all, which are present in the market for speculative purposes.
“It drives up prices, that’s for sure,” says the broker. And the buildings put up for sale at $ 800,000 are far from being turnkey! Sometimes I say to my customers: “Are you sure you want to buy this?” ”
Median price of a small income property
Greater Montreal area: $ 690,000 (+ 13%)
In Quebec: $ 434,000 (+ 3%)
Source: Professional Association of Real Estate Brokers of Quebec (APCIQ), September 2021
A good deal
Despite the price increase in this market segment, broker Daniel Murphy, at Sutton, maintains for his part that “it remains a very good deal”.
He is no longer surprised to see a duplex “in good condition” selling for $ 900,000, and well beyond that sum, in the central districts of Montreal.
“But the biggest challenge,” he concedes, “is finding the right building at the right price. I tell my customers that they need to make a purchase by analyzing [leur capacité de payer] over a broader horizon, focusing on the longer term. ”
It is still necessary to succeed in winning the bet when the property is coveted by a dozen potential buyers …
“I advised a couple who made 13 offers to buy before getting there,” he gives as an example. I am currently in the process of acquisition with another couple who visited 10 small buildings without success. ”
One can guess that the presence of serial investors in this growing market is one of the causes of these failures.
The investor does not need to fall in love with the building; for him, the decision to buy is strategic. In contrast, the individual buyer makes an often emotional choice. He wants to live in the house.
Daniel Murphy, real estate agent at Sutton
Motivated buyers
PHOTO BERNARD BRAULT, THE PRESS
This duplex located on the 3e Avenue was on sale last spring.
Very active in the southern suburbs of Montreal, real estate broker Alexia Alessandra Carosella, at ReMax, confirms that this market has been gaining popularity since the start of the pandemic.
“The buyers are between 30 and 50 years old,” she observes. They believe it is the right time to invest. The broker speaks of an informed clientele “who makes informed choices”. But she hastens to add that such a purchase should not be done blindly.
“We must avoid falling in love with the building,” she argues. There are several things to consider before moving forward. ”
She adds: “When it comes time to make an offer to purchase, we must not neglect the aspect of income that will be generated by the homes we are going to rent in order to reduce mortgage payments. ”
One of his clients has apparently adopted the right strategy while keeping a cool head. “Barely six years ago,” she says, “I accompanied her to the purchase of a first plex. Most recently, she bought her tenth income property! It has built up a real estate portfolio at lightning speed with a strategy focused on the added value of its buildings. It’s impressive. ”
Be careful!
However, it should be remembered, notes Charles Brant, director, market analysis, at the Professional Association of Real Estate Brokers of Quebec (APCIQ), that the price of “plexes” is “extremely high”, particularly in central neighborhoods. from Montreal.
PHOTO PROVIDED BY APCIQ
Charles Brant, Director, Market Analysis, at the APCIQ
“In this case, profitability becomes more difficult to find,” he explains. And there are older buildings that need renovations. It is also necessary to ensure the stability of the soil. ”
He nevertheless maintains that “for the owner-occupier, this is a good type of property, which offers a certain versatility”.
It offers the possibility of accommodating the family under one roof. We can occupy the plex, we can rent it, we can eventually transform it into a single-family house, if municipal regulations allow it.
Charles Brant, Director, Market Analysis, at the APCIQ
On this question, Charles Brant observes that it is easier to transform plexes outside the island of Montreal, which constitutes “an advantage for buyers who have such aims”.
This is without counting the prices charged by sellers, which are significantly lower in the markets located in the periphery. “There are still significant gaps, he notes, but they tend to narrow because of increasing demand. ”
A dream still accessible, the acquisition of a small income building at the present time?
“Yes, it’s an investment that makes sense,” concludes the market analyst. With the strength of the rental market, it remains a type of property that offers many attractions. ”
What investors who are active in this market seem to have understood… to the detriment of individual buyers.