January 15th 2025
I had the opportunity over the holidays to spend some time with a good family friend. At one point the topic of investment real estate came up. He indicated he was thinking seriously about starting an investment portfolio and wondered what his first purchase should be.
By way of background this chap is 50 years old. Soon to be an empty nester. A very successful businessman. Probably at or near the top of his game. I told him I thought he should start with a duplex or triplex. ‘Why?’ he asked.
The reason is that a multi-family residential building, say a triplex, is relatively easy to acquire and finance. Is simple to manage and gives a reasonably good rate of return. Consider for example you are working with a purchasing budget (cash and financing) of about $700,000. With $700,000 you can in Niagara buy a pretty good house or a pretty good triplex. The house would probably rent for about $2,800 per month.
The Triplex on the other hand would likely bring in in the neighbourhood of $4,500 per month, or more. Of course there are additional costs associated with the triplex. You as landlord are most likely going to be paying, heat, water and house meter hydro. In addition, you are going to have to arrange for lawn care and snow removal. All these considerations do not come into play when you rent out a single-family home. They are the tenant’s responsibility. But even factoring them all in, 
you are likely at least $1,000 per month ahead with the triplex. And with a triplex you have 3 products that are easy to rent. One, two or three bedroom units. In good condition and priced right they are always in demand. You won’t be carrying units vacant month after month.
Now at the beginning I gave you a little background of my friend’s bio. That’s because while I always would feel comfortable recommending starting out with a duplex or triplex, it is not ‘one size fits all’ when it comes to building an investment portfolio. I remember in one of my seminars an attendee coming up to me and saying “I’ve got a cash flow problem.’ ‘Well’, I said ‘a lot of people have cash flow problems.’ ‘No’ he said. ‘My problem is I’ve got too much cash. I started a franchise operation and the money is just rolling in. I don’t know where to invest it.’ Obviously, he’s got options most of the rest of us do not. And he can build an investment portfolio with different dynamics than most of the rest of us. Especially the person just starting out.
And, the fact is the investor who is 30 years old can approach things differently than the guy just starting in his mid-50’s. And the guy who is living paycheque to paycheque will approach things differently than the guy whose paycheque involves lots of surplus cash. But in either case, starting out with a duplex or triplex is a great beginning.
So, with my ‘Money Machine’ plan of acquiring one property a year for 10 years, why not just stick to triplexes? Of course you can, and that’s really not a bad idea. But I’m a big believer of mixing things up. ‘Diversifying.’
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Multi-family dwellings bring with them a number of challenges. Tenant mix for example. It can be a huge challenge if you end up with tenants that don’t get along. A tenant in the main floor of a triplex isn’t going to complain at all if the tenants above him or below him are noisy if they are his friends. When they are not, he’s going to complain about every little noise. I had one main floor tenant complain that he could hear the upstairs tenant’s cat walking around. Cats don’t generally clump about.
And then you’ve got challenges with heat. Most multi-family buildings are heated with hot water. One thermostat or boiler control. Some like it hot. Others like it cold. And with hot water heat it’s tough to provide A/C. And assuming tenants move with a certain frequency, because you have 3 units opposed to one, you’re going to face tenant turnover three times as often in a triplex as you would in a single family. So, yes, a triplex provides better returns, but you will have to work a little harder.
Column space means we’ll have to break off here and pick things up next issue. But stay tuned. We’ve got some key things to consider as we seek to expand our portfolio.