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Is a Duplex or a Triplex a Good Retirement Investment?
Quite simply depending on your situation yes a duplex or a triplex is a good retirement investment, it could be an amazing way to boost your retirement savings. Depending on how adventurous you are and which stage of life you are at with your family it could be the best decision you’ve ever made.
Generally speaking, my wife and I have self-proclaimed ourselves as nomads, much to the chagrin of our children. We’ve recently made the decision to consider selling our 4-bedroom home for a Duplex or Triplex in order to potentially ramp up our retirement savings and freedom.
I’ve noted in other posts that I’m very interested in downsizing, getting rid of “stuff” and moving into much smaller space will definitely force us to reduce the things we have but I feel it will really shift our thinking to away from collecting stuff to having experiences as a couple and with our children.
The one thing I’ll say about starting this blog it really is forcing me to practice what I preach, I’ve already sold one of our cars and now we’re talking of selling the house to downsize and put even more money in our pockets for our retirement savings.
Upsides Getting a Duplex or a Triplex as a Retirement Investment
Live Mortgage Free
Lol, I had this number 3 but decided to move it to number 1 for obvious reasons. If you do the math right and find the right place for you, you can literally live mortgage free. The renters will pay for your mortgage so that you can pocket more of your money.
In our case, we’re looking at moving into one of the units then renting the other one/two units out.
Moving closer to downtown
I love the idea of being closer to the “action” and not being reliant on a car to get everywhere. I want to walk to get coffee, breakfast, or groceries.
As we get older and closer to retirement, this will become even more important. We’ll be looking for an area that is obviously safe and vibrant in terms of things going on and interesting shops and restaurants.
Having access to public transportation will be an important factor as well.
All of these factors are important to think about when attracting tenants as well. Being close to amenities and transportation will help to attract more quality renters.
I want the kids to become more urban
I’d like them to get a taste of what it’s like not to live in the suburbs where everyone has the same house. It sounds against the grain but I think it’s important to have your kids understand what it’s like to be in an urban environment and get a taste what it’s like to live in a vibrant community. Suburbia can be very bland and not so interesting.
Tax Benefits
As a landlord, you are able to use tax deductions as part of your taxes every year. In the USA you should check with your local state. In Canada, you can claim half of your expenses as a business expense so any renovations or repairs can be used to reduce your taxes each year.
Financial Security for your Children
It’s important to consider the current cost of living. Where I live Ottawa, Ontario it was just released last week that the average house in Ottawa is $500K. The salaries are not rising nearly as fast as the cost of the average house.
I’m asking myself how will my kids be able to afford a house of their own in 10-15 years without being mortgaged to death while at the same time being saddled with impossible student loan debt.
My solution to help them is to make some small sacrifices to our current lifestyle (giving up our beautiful back yard, Pool and space) to ensure that they are on a financially solid base.
A duplex or triplex will provide our children one of three options 1) they can decide to live in it 2) they can decide to continue renting out the units or 3) they can sell it and take the profits of the sale.
Our plan will be to find a place that falls in the $700K -$900K range put a sizable down payment (approx. $200K) the remainder of the mortgage should be covered by the rental units.
I have not included taxes, utilities or any other expenditures, right now I’m working solely on getting rid of the mortgage and saving more of my paycheck towards investments.
Downsides of Getting a Duplex or a Triplex as a Retirement Investment
You’re a Landlord
Now some people may have no issues with this but in our case, we would be living in the same complex so we would have to expect late night calls for problems.
We’d have to be able to deal with not being in a house anymore and hearing noises that we’ve not heard since we were renting. A solution some have taken in this situation is to hire a property management company to deal with everything from maintenance to the screening of tenants.
We’d have to be prepared to take care of emergencies and have extra money put away for such emergencies and regular upkeep of the duplex or triplex.
Tenants Who Miss Rent Payments
It’s going to happen where a cheque bounces or they don’t pay on time. You as the landlord will have to make sure you’ve got the funds available because the bank won’t care if your tenants are late for your mortgage payment and believe me they will charge you for it.
Damage to Property
You’ll have to expect that there will be damage from time to time to the property, whether its physical damage or pet damage or even replacing a roof. You’ll need to be prepared for all eventualities.
Vacancies
You will always need to be prepared financially for a month or two of vacancies. Where we live the rental market is very tight so we may not have this issue but, other markets will vary.
So should you consider getting a duplex or triplex as an Investment for Retirement? Absolutely YES!
It checks off a lot of boxes that are important to us as a family.
- It will allow us to save more and accelerate our retirement savings
- It will allow us to travel more often
- It will provide financial security in the event of a crisis (loss of a job or daughter announces she wants to go to Harvard! Lol)
- It will be less space to care for and manage as we get older
- It will provide Financial security for our children
- We want to live in a more urban setting
The biggest challenges we foresee are simply the adjustment for our children, while my wife and I are totally fine with it, remember we’re nomads!
Our kids who have been used to living in a house with lots of space, this will be a big change and of course, they don’t see the big picture right now, or the reason why we want to do this and why it’s good for them down the road…but they will.
The kids will also see the residual effects in terms of traveling more which all four of us want to do more of.
For me, the scary part will be parting with things I didn’t think I’d have to part with this soon like my record album collection may have to go, furniture for rooms we won’t have and all that stuff in the garage my god there is so much that will have no place.
My wife will be hit hard as well, one of the bedrooms is her “dressing room” sorting through clothes and shoes there will be no room in the new place will be an adventure on to itself.
We may get a storage unit to start with to see what could or might fit if we really want, but I see us selling a large part of it prior to moving which is probably the for the best anyway.
How Much should you pay for a duplex or triplex?
It really depends where you are looking. In our case, they range from 600K to well over a million but you would have to do the math because at the end of the day you want (in our case) to at least break even if you can make more with higher rents even better. The monthly expenses should be covered by the rents.
I’ve seen articles on duplexes in the USA going for less than $200K which is incredibly reasonable, but presumably, the rents are low as well.
If you are considering a duplex or triplex as part of your retirement plan, consider all the factors I mentioned above.
You may have other things that are important to you that I’ve not mentioned and if you do feel free to leave comments below.
I’ll post an update as we get closer to pulling the trigger
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Until next time…
