Plex buyers under pressure | The Press

The market is increasingly busy with investors

For sale: $899,000. Duplex located rue Saint-Vallier, in the heart of La Petite-Patrie. Renovated. Year built: 1900. Potential gross revenue: $33,780 per year.

A dream still achievable, the purchase of a small income building?

"Yes, it's possible," summarizes real estate broker David Tardif, at Royal LePage. But you have to be financially strong to be competitive with other buyers when you submit the purchase offer. »

And who are these “other buyers”?

"There are more and more investors who bought large income properties and who are now there," he explains. You have to understand that they [investors] calculate that small buildings are easier to buy and sell than a 25-unit building. »

Result: a young couple who aspire to become homeowners – and who intend to rent the accommodation located on the second floor, in the case of a duplex – face “competitors” who do not have the same interests and, above all, who are present in the market for speculative purposes.

"It drives up prices, that's for sure," notes the broker. And the buildings put up for sale at $800,000 are far from being turnkey! I sometimes say to my clients, “Are you sure you want to buy this?” »

Median price of a small income property

Montreal metropolitan area: $690,000 (+13%)

In Quebec: $434,000 (+3%)

Source: Professional Association of Quebec Real Estate Brokers (APCIQ), September 2021

A good deal

Despite the price increase in this market segment, broker Daniel Murphy at Sutton maintains that "it's still a very good deal."

He is no longer surprised to see a duplex “in good condition” sell for $900,000, and well beyond that sum, in the central neighborhoods of Montreal.

“But the biggest challenge, he concedes, is finding the right building at the right price. I tell my clients that they should make a purchase by analyzing [their ability to pay] on a broader horizon, betting on the longer term. »

You still have to manage to win the bet when the property is coveted by a dozen potential buyers...

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“I advised a couple who made 13 purchase offers before getting there, he gives as an example. I am currently in the acquisition process with another couple who visited 10 small buildings without success. »

We can guess that the presence of serial investors in this growing market is one of the causes of these failures.

The investor doesn't need to fall in love with the building; for him, the decision to buy is strategic. In contrast, the individual buyer often makes an emotional choice. He wants to live in the house.

Daniel Murphy, real estate agent at Sutton

Motivated buyers

Very active in the southern suburbs of Montreal, real estate broker Alexia Alessandra Carosella, at ReMax, confirms that this market has been gaining in popularity since the start of the pandemic.

“The buyers are between 30 and 50 years old,” she observes. They think it's the right time to invest. The broker speaks of an informed clientele “who make informed choices”. But she is quick to add that such a purchase should not be made blindly.

“You have to avoid falling in love with the building,” she argues. There are several things to consider before moving forward. »

She adds: “When the time comes to submit an offer to purchase, we must not neglect the aspect of the income that will be generated by the accommodation that we will be renting in order to reduce mortgage payments. »

One of his clients seems to have adopted the right strategy by keeping a cool head. “Barely six years ago,” she says, “I helped her buy a first plex. She recently bought her tenth income property! She built up a real estate portfolio at lightning speed with a strategy focused on the added value of her buildings. It's impressive. »

Caution !

It should be remembered, however, notes Charles Brant, director, market analysis, at the Association professionnelle des courtiers immobiliers du Québec (APCIQ), that the price of "plexes" is "extremely high", particularly in central neighborhoods from Montreal.

"In this case, profitability becomes more difficult to find," he explains. And there are buildings of a certain age that require renovations. It is also necessary to ensure the stability of the soil. »

He nevertheless maintains that “for the owner occupant, it is a good type of property, which offers a certain versatility”.

It offers the possibility of housing the family under one roof. We can occupy the plex, we can rent it, we can eventually transform it into a single-family home, if municipal regulations allow it.

Charles Brant, Director, Market Analysis, 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 taking into account the prices asked by sellers, which are much lower in the markets located on the outskirts. “There are still significant gaps, he notes, but they tend to narrow due to increasing demand. »

A dream still accessible, the acquisition of a small income building today?

"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. »

This seems to have been understood by investors active in this market… to the detriment of individual buyers.