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Raise the Roof: Creative Secondary Dwelling Units

Updated: Nov 13, 2023

Background story:

We built a Duplex from scratch in 2018 in a really good location. We had acquired the land when we were approached by someone buying an old bungalow in an urban core to flip it.

The old house had a double lot, and he asked us if we would be interested in purchasing the empty part if he divided it. It was a great opportunity, and we agreed. The lot, after being severed, was small, but we could still build a duplex with two bedrooms in each unit. This was the maximum density we could do at the time with the R1 zoning. We got a good deal on the lot as it was off-market deal.

Lot Purchase price: 68k

I don't remember our total building costs. I didn't use to keep a good log of this, but our final mortgage was for 302k with a 5-year fixed rate of 3.74%.

Fast forward to 2023 when Ontario introduced Bill 23: a plan to build 1.5 million homes by 2031, with tax incentives, deregulating and simplifying development and planning processes. This meant that adding additional dwelling units on existing homes became possible, despite the zoning.

This duplex was one of our least cash-flowing properties, yet it was located in a prime location. Selling it was never going to be a question, but we knew we were due to renew its rate at the end of 2023 meaning we would start to lose money on it every month.

Then, the tenants residing in the top unit requested to move into another one of our bigger units. This is when Rob came up with the crazy idea... He was discussing the new Bill with our employee while they were working on a project next door of this duplex. They were brainstorming ways to take advantage of this bill. Rob stepped outside, looked at the roof of the duplex and said: "What if we take the roof off of this thing?". And there you go...

We knew the foundation was able to take it since it was built only 5 years before and it was the exact same foundation we would have poured whether it had 2 storeys or 3. I took out my planning software, opened the original drawings and got to work designing a staircase on the main floor by moving the existing front door a few feet to the right, eliminating the entrance closet and shrinking the entrance hall by a foot to make room for the new stairs. Rob got to work by speaking to a few framers and seeing what they thought.

May 12, 2023:

Big news alert! I’m finally able to share what we are planning with this property! We’re taking this Duplex we built in 2018 and converting it into a TRIPLEX!

Listen to this: We’re literally taking off the roof, putting it on the front lawn, building up a new unit, and then putting the roof back on 😳 It sounds insane, but we’re confident that we can push that ROI and value way further and create a diamond in our portfolio! This property is in a prime location and it deserves a polish.

Our top unit tenants moved into another one of our buildings so we took the opportunity to do this now especially since this property’s mortgage term will be due for renewal end of year so the timing is perfect for a refinance! We’ve never done anything like this before so stay tuned and wish us luck!!

May 29: 2023: Just another Monday… We took advantage of the amazing all-sun-no-rain-weather for the next couple of days to get this roof off! It should be going back on in just a couple days!! Stay tuned!

Thank you to our amazing framing crew and the crane team!

May 31: 2023:

Part 2 of this Triplex Roof Crazyness! The roof goes back on!

September 30, 2023:

Our Triplex conversion is officially done! We handed over the keys to the new top unit yesterday.

We converted this 2018 build from Duplex to Triplex thanks to the new zoning by-laws that allowed us to do so. This property is in a prime location and we wanted to boost it’s potential!

With the new appraisal we can refinance and pull out a large chunk. Despite the new rate, we will still cashflow thanks to our initial loan and this new income. 👌

& Like all our other projects, we are reinvesting the money in the next builds!

Rinse 🚿 & repeat 🔁 x infinity ♾️

Our basement tenant continued to live in his unit the entire length of the project. He was really understanding and supportive about the whole thing. We did our best to minimize the impact the project had on him, but I'm sure it wasn't perfect.

Let's talk numbers:

I know this is what you all came for, finally, the numbers!!

We had a budget of 150k for this project. We went over budget at approx 165k.

A few of the big ticket items included the framing, the crane operator and the electrical work. The framing and crane was mostly inflated due to liability seeing as no one had ever done a project like this before. We understood and we bit the bullet. Electrical work just ended up being more complicated with adding in the new service, disconnecting the main floor unit, moving the panel, etc.

Initial mortgage: 302k

Old 2018 Appraisal as a Duplex: 392k The new top unit brings in 1,900$ a month.

New 2023 Appraisal as a Triplex: 900k Paid down mortgage as of September 2023: 269k

Renovation: 165k = 434k

New mortgage: 465k

This new mortgage will cover all of the money we put into the project + a few extra thousands to put in our pockets. Could we have asked for a bigger mortgage? No, actually. Given the new interest rates and the existing leases from the 2 other units, we just didn't qualify for more. But hey, as long as we don't need to leave any money in the deal and we can recuperate all of it back, we're happy campers! Plus this way, a smaller mortgage means we can still cashflow positively despite the new rate.

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