How a Strategic Mortgage Plan Could Help You Buy a Triplex, Keep Your Condo, and Build Long-Term Wealth

The Goal: A New Chapter in Kitchener

For a young family looking to put down roots, buying a triplex in Kitchener offers the perfect blend of lifestyle and investment potential. This couple, based in Toronto, is ready to move closer to their parents and they have a goal raise a family in a family-friendly neighbourhood.

Their dream property? A triplex in Kitchener. With plans to live in one of the units and rent out the other two, they see this property as both a home and a stepping stone to building long-term wealth.

However, they face a common dilemma in today’s real estate market. They own a condo in Toronto valued at $650,000, but with the current market conditions, selling it doesn’t feel like the right move.

Instead, they’ve decided to rent it out and refinance the condo to access some of its equity to help fund the purchase of their Kitchener triplex.

The Discovery Call: Goals and Priorities

The couple reaches out to me for help in structuring a plan that would align with their short-term and long-term goals.

During our initial discovery call, they shared their priorities:

1. Move to Kitchener: Purchase a triplex to live in while generating rental income from the other two units.
2. Retain the Condo: Keep the Toronto condo as a rental asset, leveraging its equity for the triplex purchase.
3. Flexibility for the Future: Ensure their mortgage structure allowed easy access to equity for future investments.
4. Pay Down Debt Faster: Use rental income and prepayment privileges to accelerate equity growth.

By the end of our conversation, it was clear they needed a solution that offered flexibility, competitive rates, and scalability. I assured them I would secure pre-approvals for both mortgages and provide tailored options.

The Pre-Approval Process

I worked through the pre-approval process, incorporating both the couple’s financial strength and projected rental income. Here’s what they qualified for:

1. Toronto Condo Refinance:
2. Kitchener Triplex Purchase:

Estimating that the rental income from both the triplex ($3,600/month) and condo ($2,400/month) was instrumental in securing these approvals and achieving favourable rates, particularly for the owner-occupied triplex.

House Hunting: Finding the Perfect Triplex

With pre-approval in hand, the couple began their search for a triplex in Kitchener using Realtor.ca.

Here’s how they found their perfect property:

1. Search Location: Entered "Kitchener" as their location.
2. Property Type: Filtered for "Multifamily" with 3 units to target triplexes.
3. Price Range: Narrowed down to properties under $850,000.

Their search returned 10 listings, and one property stood out located in a family-friendly neighbourhood, it offered the right mix of affordability, rental potential, and proximity to their parents.

Running the Numbers: From Condo to Triplex

To make their move to Kitchener and purchase the triplex the couple needs a clear financial plan. They’ve decided to refinance their mortgage-free Toronto condo to access $180,000, which will cover the down payment and closing costs for the triplex.

By renting out their Toronto condo and leveraging rental income from the Kitchener triplex, they aim to minimize their out-of-pocket housing costs.

Step 1: Refinancing the Toronto Condo

The couple’s Toronto condo is valued at $650,000, and they could refinance to cover the downpayment and closing costs. They decide to borrow $180,000 for the triplex purchase.

Mortgage Details for the Condo:

• Loan Amount: $180,000
• Interest Rate: 4.44% (5-year fixed)
• Amortization: 30 years
• Monthly Mortgage Payment: $901.31
• Monthly Property Tax: $221
• Monthly Condo Fee: $502
• Total Monthly Expenses for the Condo: $1,624.31

Projected Rental Income:

• Renting their 1 + den condo at $2,400/month generates a positive cash flow of $775.69/month after covering mortgage, property tax, and condo fees.

Step 2: Purchasing the Triplex in Kitchener

The triplex is listed for $799,900, and the couple plans to live in the main floor unit while renting out the upper and basement units (House Hacking) for $1,800 each (totalling $3,600/month in rental income).

Mortgage Details for the Triplex:

• Purchase Price: $799,900
• Down Payment: $159,980 (from the condo refinance)
• Loan Amount: $639,920
• Interest Rate: 4.29% (5-year fixed)
• Amortization: 25 years
• Monthly Mortgage Payment: $3,468.46
• Monthly Property Tax: $397.76
• Total Monthly Costs for the Triplex (Mortgage + Property Tax): $3,866.22

Rental Income from the Triplex:

• Renting the two units at $1,800 each brings in $3,600/month in rental income.
• Net Monthly Out-of-Pocket Cost to Cover the Mortgage and Tax: $365.22/month.

What This Means for the Family

By refinancing their Toronto condo, the couple secures the funds to cover the down payment and closing costs for the Kitchener triplex. With both properties generating rental income, they’re able to offset a significant portion of their housing costs:

1. Toronto Condo Positive Cash Flow: $738/month
2. Kitchener Triplex Out-of-Pocket Cost: $365.22/month
3. Net Cash Flow Across Both Properties: $372.78/month.

This strategy allows the couple to transition to their new home in Kitchener while retaining their Toronto condo as a valuable rental asset. With careful planning, they’ve turned their move into a financially sound step toward building long-term wealth.

I used my mortgage app to calculate these numbers. If you’d like to explore your own options, you can download the app for free! Just visit my website and find the links to the Apple Store or Google Play Store: My Home Center APP

Accepted Offer: Moving to Mortgage Approval

With their finances pre-approved and a clear plan in place, the couple found their perfect triplex in Kitchener and submitted an offer. When the seller accepted their offer with a Condition of Financing (COF), the next step was obtaining full mortgage approval from a lender. This process involved underwriting, where the lender evaluates all aspects of the purchase to confirm their eligibility and finalize the mortgage terms.

The Underwriting Process: Securing Two Mortgages

To finalize the financing for their triplex purchase, the couple required underwriting approval for two mortgages: one to refinance their Toronto condo and another for the triplex in Kitchener.

Here’s a summary of how the process unfolded:

1. Refinancing the Toronto Condo

The first step was underwriting the refinance for their Toronto condo to access the equity needed for the triplex purchase.

• Loan Amount: $180,000
• Market Rental Income: Verified at $2,400/month, ensuring the condo generated positive cash flow after covering its mortgage, property tax, and condo fees.
• Property Taxes and Fees: Total monthly costs, including the new mortgage payment of $939, property taxes of $221, and condo fees of $502, were calculated to confirm the property’s strong rental income exceeded expenses.

2. Adding the Triplex Property Information

Next, the triplex details were added to the underwriting application to secure the purchase mortgage:

• Purchase Price: $799,900
• Down Payment: $159,980 (from the condo refinance)
• Loan Amount: $639,920
• Property Taxes: $397.76/month
• Rental Income: Projected at $3,600/month for the upper and basement units, pending confirmation through a market rental appraisal.

Why Two Mortgages Were Essential

Having two mortgages allowed the couple to:

1. Unlock Equity from the Condo: The refinance provided the funds to cover the triplex down payment and closing costs while keeping the condo as a rental asset.
2. Structure the Triplex Financing Separately: The triplex mortgage included favourable terms for an owner-occupied property, leveraging lower rates and maximizing cash flow.

This two-pronged approach ensured both properties contributed to their overall financial strategy, balancing income generation with flexibility for future investments.

Presenting Mortgage Options

Once underwriting was complete, I presented the couple with three tailored mortgage solutions that aligned with their goals:

All-In-One Mortgage Products:

• These combine a mortgage and a line of credit into a single account, simplifying cash flow management.
• While offering flexibility, the couple felt the costs and complexity didn’t align with their needs.

Monoline Lender Mortgages:

• These lenders offered competitive rates and lower penalties for breaking fixed-rate mortgages.
• However, accessing equity in the future would required a Home Equity Line of Credit HELOC, the Monoline lender's products, although great, didn't fit with the client's goals for future investing.

Scotia Total Equity Plan (STEP):

• This product stood out for its built-in Home Equity Line of Credit (HELOC) that grows automatically as the mortgage is paid down.
• It also allowed for a customizable structure, splitting their mortgage into fixed and variable components.

Why They Chose the Scotia STEP

After careful consideration, the couple decided on the Scotia STEP as it perfectly aligned with their goals. Here’s why:

1. Flexibility for Future Investments

The Scotia STEP’s HELOC feature gave them the ability to access equity without refinancing or incurring additional legal fees. This seamless access meant they could act quickly when new investment opportunities arose.

2. Customizable Structure

The STEP allowed them to split their mortgage, with part in a fixed rate for predictability and part in a variable rate to take advantage of potential interest savings. This balance provided both stability and growth potential.

The Final Step: Approval Secured

With their chosen product in place, the lender approved their mortgage for the triplex and the refinance. The couple was thrilled to move forward, knowing they had the right financial solution for their current needs and long-term plans.

The Importance of Tax Efficiency: Working with a CPA

During our discussions, I emphasized to the couple that managing rental properties isn’t just about generating income—it’s about ensuring tax efficiency to maximize their financial benefits. While I could guide them on structuring their mortgages and accessing equity, I explained that tax planning for rental properties is a specialized area where a Certified Professional Accountant (CPA) is essential.

Why a CPA is Important for Rental Property Owners

Owning multiple rental properties effectively turns real estate into a business, with its own income, expenses, and tax obligations. A CPA can help the couple:

Understand Tax Deductions:

• Identify eligible expenses, such as mortgage interest, property taxes, maintenance, utilities, and property management fees, that can reduce taxable income.
• Explore depreciation rules and how they can impact their taxable income over time.

Separate Personal and Business Finances:

• Ensure rental income and expenses are tracked separately from personal finances to simplify bookkeeping and meet Canada Revenue Agency (CRA) requirements.
• Recommend tools or systems to keep detailed and accurate records.

Plan for Tax Efficiency:

• Advise on strategies to minimize tax liability, such as optimizing write-offs or structuring ownership for maximum benefit.
• Educate them on CRA guidelines for reporting rental income and claiming expenses, ensuring compliance while maximizing savings.

Prepare for Future Investments:

• Help the couple project how rental income will impact their overall financial picture and taxes.
• Provide insights on how to structure future property acquisitions in a tax-efficient manner.

My Role vs. a CPA’s Role

I clarified that while my expertise lies in structuring their mortgages and helping them achieve their homeownership and investment goals, tax planning is beyond my scope as a mortgage agent. I encouraged them to consult with a CPA who could provide tailored advice to meet their specific needs.

Long-Term Benefits of Working with a CPA

• Avoiding Costly Mistakes: Rental property tax rules can be complex, and a CPA ensures compliance with CRA regulations, avoiding penalties or missed deductions.
• Maximizing Profitability: By identifying all eligible tax benefits and structuring their finances correctly, they can retain more of their rental income.
• Peace of Mind: Knowing that their taxes are handled by a professional allows them to focus on managing and growing their properties.

By partnering with a CPA, the couple would not only navigate their current tax obligations but also position themselves for success as they expand their portfolio. I provided them with referrals to trusted CPAs who specialize in rental properties, ensuring they had the right resources to guide them through this next chapter in their financial journey.

Wrapping It All Up

The couple’s journey to purchasing a triplex in Kitchener while retaining their Toronto condo demonstrates the importance of thoughtful planning and working with the right experts. By leveraging the Scotia Total Equity Plan (STEP), they secured the flexibility to achieve their immediate goals of moving closer to family while laying the groundwork for future real estate investments.

Here’s what made their plan successful:

1. Strategic Financing: Refinancing their Toronto condo allowed them to access equity for the triplex purchase while keeping it as a valuable rental asset.
2. Choosing the Right Mortgage Product: The Scotia STEP provided the flexibility to access equity, customize their mortgage structure, and make prepayments to build equity faster.
3. Long-Term Tax Efficiency: Partnering with a CPA ensured they could maximize tax benefits, properly track rental income and expenses, and stay compliant with CRA regulations.

With these pieces in place, the couple is not just buying a home—they are building a scalable real estate investment strategy that positions them for financial growth.

Ready to Build Your Financial Future?

If you’re considering a move, a new investment, or simply want to make the most of your home equity, I’m here to help. Together, we can craft a mortgage strategy that aligns with your goals and ensures you’re ready for whatever the future holds.

Let’s talk about how we can make your dreams a reality.

Contact me today to schedule your discovery call and get started!

Dwayne Kavanagh

https://kavanaghmortgages.ca/

416-937-5991

dwayne@kavanaghmortgages.ca

FSRA License # M22004377 Mortgage Agent - Level 2 at Mission 35 Mortgages FSRA License # 12844

Disclaimer

Hey there! Before you dive headfirst into refinancing condos and buying triplexes, please remember that I’m a mortgage agent, not a CPA, lawyer, or magician. While I can work wonders with your mortgage, tax advice, legal advice, or guarantees of financial success are not part of the package.

Think of me as your mortgage matchmaker—I’ll help you find the perfect product, but for everything else, consult the experts! Always chat with a qualified CPA for tax stuff, a lawyer for legal stuff, and maybe your favorite barista for life advice (they’ve heard it all).

Real estate is an investment, and like any investment, it comes with risks. So, while this story sounds like a fairy tale, results may vary. Always do your homework, ask lots of questions, and make decisions that make sense for your unique situation.

Now let’s get you that dream home (or triplex)! 😊