In Toronto, investors are paying upwards of $1.4 million for resale legal triplexes. But what if you could convert a single-family home into three legal units for far less—and pocket the difference in value add? Sounds appealing, right?
Today, we are going to show you how it’s done. This isn’t just a theory; we will walk you through our exact process, costs, and numbers from one of our recent projects.
Is This Worth It? The Big Picture
For a project like this, you could easily double your investment on completion and increase your monthly rental income from $4,500 to $7,000+.Â
But, there’s a catch—this is a substantial project. We’re looking at an investment of over $150K and a construction timeline of around 9 months. Let’s dive into how that breaks down.
The Timeline: What’s the Process?
Planning Phase (4-6 months):
The first part of the project is design and securing zoning approvals/permits. Here’s a pro tip: if you’ve just bought the property, start the design process during your closing period. This will help save on holding costs and get you ahead of the game.
Construction Phase (4 months):
Once the design and permits are done, the fun begins. Here’s a breakdown of the key stages in construction.
A Breakdown of the Construction Phase
Demolition Phase: We start by stripping the house down to its core structure, creating a blank canvas. This phase can reveal unexpected issues, so it’s smart to budget a little extra for surprises that may come up.
Framing & Structural Work:Â This is where we divide the space into three separate units. We also add a larger bathroom to the main floor and ensure each unit has its own plumbing, wiring, and electrical systems. This forms the backbone of the triplex.
Electrical System: We upgrade the home’s electrical system to handle three separate units, including increasing the panel to 200 amps, installing individual panels for each unit, and running new wiring to support the added appliances.
HVAC:Â To provide heating and cooling for three units, we install individual mini-split systems, giving each unit control over its own temperature. We also add fire safety features like fire dampers and smoke detectors.
Plumbing: We upgrade the plumbing system from half-inch to three-quarter-inch pipes, ensuring all three units can run water simultaneously. We also add new plumbing lines for each unit’s kitchen and bathroom.
Basement Modifications:Â We modify the basement to meet exit and lighting requirements by adding a larger window. We also convert part of the garage into a hallway, providing an exit route for the basement unit. The remaining garage space is turned into storage lockers, similar to a condo setup.
Fire Safety & Sound Control:Â To enhance safety and privacy between units, we install fire-rated drywall, insulation, and resilient channels for soundproofing. Fire-rated exits and doors are also added, and the work is thoroughly inspected.
Finishing Touches:Â After the major systems are in place, the finishing touches are added. This includes new flooring, fresh paint, updated kitchen cabinets, new appliances, and modern plumbing fixtures, all of which help make the units tenant-ready.
The Numbers: Is It Worth It?
Now, let’s talk about the financials because this is what makes the investment worthwhile.
Soft Costs (Permits, Designs, etc.): $15K +Â Construction Costs per Unit: $45K =Â Total Investment for 3 Units: $150K
When you’re done, your monthly rental income could jump from $4,500 to $7,000—that’s an extra $2,500 each month. To get the same rental income from a $500-600K condo would take a much larger investment, so this is a major win.
If you’re an investor looking to refinance, here’s the potential:
- Purpose-built multiplexes in Toronto are currently valued at around 4-4.5% cap rates.
- Converted triplexes tend to be valued at 5.5% cap rates.
For example, let’s say you’re making $7,000 a month in rent, and your expenses are around $1,000. If we run the numbers at a 5.5% cap rate, you’re looking at a property value of around $1.3 million.
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Even though it’s a conversion, this still puts you in a strong position. To put it into perspective, a purpose-built triplex with older finishes in the area recently sold for $1.4 million, so this property would likely be valued in the $1.3 million range after the conversion.
That means, with a $240K equity pull, you could potentially recover your entire investment and more—plus cash flow even better after the renovation.
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How We Can Help
Converting a single-family home into a legal triplex isn’t a quick, cheap, or easy process, but when you can add value and boost your rental income, it’s well worth it.
If you’re interested in learning more about how to find properties that can be converted into triplexes or want help with a project of your own, feel free to reach out to us.Â
We’re not just a real estate brokerage—we’re investors who have done this ourselves, and we specialize in Toronto multiplexes. Whether you’re after a property that’s ready to rent or a house you can convert, we’ve got you covered.
Here’s what it’s like to start as a client with us:
- Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
Market Search & Purchase: We’ll search the market to find the perfect property for you.
Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll coach you as you manage the project.
Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.
Ready to get started? Click on the link below, and let’s start working together!
What Toronto Real Estate Investment Is Right For You?
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