Not everyone who invests in real estate is looking to amass a large portfolio of properties. Many people just want to have some extra income each month without the management headaches of being a landlord for dozens of properties and hundreds of tenants. If this sounds like the type of investor you see yourself as then you may want to consider investing in a triplex.

A triplex is a building that houses three individual apartments. Each of these can be rented out by a tenant and generate income. Added together, if you do the numbers correctly, they will pay for themselves while also generating a positive cash flow every month for yourself. This is a standard way of investing in triplexes and is done hundreds of times a day throughout the greater Toronto area. However let me show you how you can leverage these units so you get to live in one for free.

Living For Free. The Benefits Of Buying A Triplex

Let’s say each unit rents for $1,250 a month. This would come to $3,750 a month in gross rental income. Now let’s add in your costs. If your monthly mortgage payment on the property is $1,100 and your property taxes and insurance are $700 then your total hard costs come to $1,800 a month. Let’s also factor in a vacancy rate of two months of rental income over the course of the year. The vacancy rate is the amount of time it takes for you to get a new tenant when the previous tenant moves out. Using the figures here that would give you a vacancy amount of $7,000, divided by 12 months for a total of $625 a month. Let’s then add in $100 a month for potential maintenance on the units. When we add that to the other monthly expenses we listed it comes to $2,625 a month which leaves a net profit of $1,225 a month. This is money you could pocket every month as income. But here is another way you can use that money.

If you were to purchase your own home to live in you would have duplicates of most of the expenses of your triplex. You would have a mortgage payment, tax payment, insurance payment, maintenance expenses, etc. Depending on the size of the home you purchased it may very well come to more than the $1,225 a month profit you are receiving from your triplex. Instead of incurring all of the expenses of purchasing your own home, why not live in one of the units of the triplex? Let’s look at the numbers.

If you were to occupy one of the units you would lose $1,250 a month in rent. This means your net profit would go from $1,225 a month to negative $25 a month. However, you would now be living in the unit with all of the financing, taxes, insurance and maintenance paid for only $25 a month. If you raised the rent on each tenant when their leases expired by $12.50 a month then you are now living for free. Also, the rental income is paying your mortgage which means it is generating equity in your property for you. You get the double benefit of having a place to live for no cost and the ability to sell it and cash out down the line without having put any of your own money into the property.

Now not everyone wants this type of lifestyle. I know many investors who do not want to live in the same building with their tenants. But if this type of scenario works for you then it is a great way to use your investment to pay for your own housing and still get all of the benefits of owning property.

Chris Allen, Toronto’s Real Estate Authority is the award winning author of The Book on Toronto Real Estate. For more information about Allen and his practice please visit.