Severing one home into two

10 Replies

Hey all,

Looking for some feedback on this idea. I sent out a mailing campaign to expired listings to a few cities in Ontario, Canada, and I received a response back from a motivated seller. This property has 2 addresses (i.e. 44-46 Main Street) and looks like it may have been a duplex at one time. It has 7 bedrooms and 3 baths. In a great area. It is currently rented by university students.  They pay $375 per room per month. 

The owner wants $430k for the home, and she told me that it only brings in $2650 month in rent. So it doesn't look like it makes sense to buy and continue to rent out. 

Here's what I'm thinking though: it appears that the home used to be set up as 2 separate homes, hence the double address. I want to convert it back to 2 separate residences and sell of both individually. 2 bed 2 bath houses are selling for $450-500k on the same street, so it seems like I could do pretty well if I was able to reno the home properly.  

Does this sound plausible? 

Looking forward to some feedback  


Compare property APN to mortgages: if one mortgage and one APN, then you need to subdivide and likely a zoning variation. If two for two, you can straight proceed with your plan.  If one for two, there's likely one APN for one mortgage, like mine and need a zoning variation again.

Notice: nothing said about street addresses!  I have six addresses, one APN and one mortgage and can't get the zoning change to sell off  piece/parts.

@Jeff C.

Depending on the municipality, @Jeff B. 's advice about PINs (APNs in his text) may not be accurate.  There are lots of places where a {usually converted} duplex sits on a single parcel of land with a single PIN - particularly if the division is over/under rather than side-by-side.

That said, if the property is a functioning student rental, then perhaps it's best and highest use is as a student rental, but managed a little better.   We have similar student houses (6 - 10 bedrooms) in that we rent by the furnished room @$425.00 - $500.00 per room depending on proximity to campus (<10-minute walk is ideal) and the amenities included (Internet, weekly cleaning service, etc.).  Are the rooms in this house of good (110 - 130 ft^2) size or is it crammed full of little rooms (70 - 100 ft^2) and that is why the rent is lower.  I recently looked at a student rooming house with more than a dozen rooms (which I did not expect when looking at the house from the street) most of which were <100ft^2 and consequently only demanded $325 - $375/room).

When we bought our first student rooming house, I was of similar mindset to you and was going to covert it into a duplex, but when I looked at the local market and the house's clientele (International Students), setting the rents appropriately and continuing as a student rental became the obvious choice.

One caution is to check zoning as the house may not be legitimately zoned as a rooming house.  Another is that most of the Schedule I lenders (Big-5) will not underwrite a mortgage against a rooming house or, in some instances, a student rental in certain neighbourhoods and you may have to find a a secondary or private lender (or purchase the house not as a rental ... meaning the rental income will not count).

Price is another matter:  $430K for 2650 in rent is far too much.  Even if the rooms were renting for $500 each, the price would be too high for us, but depending on which part of Ontario the house is in, prices are in ridiculous territory  (around here you would pay between $30K and $40K per bedroom for a student rooming house).

@Roy N. Thanks for the response. There is only 1 pin for this property. 

The property is a 25 minute walk (2km) to the university, so I believe that students can find units much closer and for a comparable price. The rooms are pretty small (8'x8' max... I haven't visited the property yet (going on Saturday) but from the photos, each bedroom only has a twin bed and even then it looks crammed. 

I have studied the demographics in the area and there are definitely more families living there than students. The zoning permits both student lodging, and single families, although I noticed in the zoning by-law that if the home is intended as lodging, then only 3 people are permitted. Not sure if I read that correctly. 

I agree that it wouldn't make sense to purchase this home if the intention is to keep it as a rental. I would need to bump up the rent to at least $500 per room and get the home for around $400k. That's not likely to work out well for me. 

My thought is that after severing the property, I could sell each home off for $325k-$350k. The comps support this price. 

Originally posted by @Jeff B. :

@Roy N. 

"Depending on the municipality, Jeff Beard 's advice about PINs (APNs in his text)"

The entire state  of California uses APNs consistently :grin:

  1. "An assessor's parcel number, or APN, is a number assigned to parcels of real property by the tax assessor"

see the wiki

I'm sure they do, but in Ontario, where the OP is located, properties have a Property Identification Numbers (PIN) and a Property Tax Roll Number (essentially your tax account).

Originally posted by @Jeff C. :

@Roy N.Thanks for the response. There is only 1 pin for this property. 

My thought is that after severing the property, I could sell each home off for $325k-$350k. The comps support this price. 

If the division is side-by-side (common wall) you should be able to do this.  If the duplex was/will be an over/under, then it will probably remain on a single PIN.

Get the history of the property. In Ontario if an owner buys an adjacent property in the same name the property will be converted to one title by the city and MPAC. Perhaps the seller bought one before the other. 

I'm contemplating financing this deal through the following strategy, I have not yet pitched it to the seller:

I'm going to propose to the seller that I will give them their full asking price, if they keep the title under their name while I renovate the property back into 2 units (I will pay for this), and I will also continue to pay the $2650 that the owner receives each month in rent throughout the duration of the renovation. I plan on paying for the reno and the rent payments from a hard money loan. Once the reno is complete, I will sell each unit separately and pay the owner off, and the remaining profit will go in my pocket. 

Any insight on this strategy would be much appreciated.


@Jeff C.

That's a risky play on your part - if you go this route, you will want to invest some quality time with your attorney to ensure you are protected.   

Before even pitching the idea, better be damn sure of the ARV and the ability to separate the parcel and sell both halves separately.

I got more ... but am late to pick-up my son.

Thanks @Roy N. I have a great relationship with my attorney, and will obviously structure this deal with his assistance. I will also ensure through the zoning by-law department that the severance and future sale of both properties is feasible.