Raise the Hammer

I should have mentioned, I too am a split property owner...and have not made it legal due to the taxes. Though I do live in it as well. Everything's up to code; it's even insured as a multi-unit. It's just not legal, in the eyes of the City.

And yes, Jason, my brief experience has been similar to yours. However, those on social assistance can be counted on for longer-term rentals than those just 'passing through' on their way to home ownership.

Regarding the taxes...

Let's take the example above. Purchase a home for $179,000. The author's downpayment seems high to me, but we'll roll with it. So, that's $700/month for the mortgage, say $175 average per month for basic utilities, $100 per month for insurance, and, for a single-family home, $225/month for taxes. Total monthly bill would be $1200. He's losing $300/month at the specified rental rate.

Now, let's split the home. For this study, we'll assume that utilities and insurance each goes up $25/month per unit.

Split once (the most common split), at the current multi-unit tax rate, he'd need to make $1600/month to break even. Good luck getting $800/month per unit. Keep the taxes the same, and we're down to $1250/month. Far more reasonable; $625/month for a split $180,000 home is a fair price, even a little low. But we haven't factored any maintenance into this, so seeking $750/month would certainly not be unreasonable.

At three units, it becomes a little more reasonable, requiring $550/month average per unit to make expenses. Still a little steep, as we're talking about a $180,000 home split three ways...but he might make it. Bring the taxes down, and he needs ~ $450/month to break even. This is actually doable, and he'd even have enough left over to maintain the place.

Four units, and he still needs to make $425/month to break even. But on a $180,000 home, we're looking at 'rooms for rent', not units. Nope, not breaking even here...

No, in order for someone to actually break even, based on the current tax rates, he'd have to let out five of the rooms at $400/month. At that rate, he'd be able to pay all his expenses, maintain the place, and even come out a little ahead. Which, after all, would have been the goal all along; no-one goes into housing looking to 'break even'.