Building up a duplex

[John Mart]

First time poster, but have been reading through articles for sometime already and can't say enough good things about this site.  

I'm currently living as a resident in Canada, Toronto with the hopes of sooner than later moving stateside. I currently own a luxury house which i renovated completely myself and plan on selling. The idea of flipping in this city is becoming less attractive with huge fees from all angles eroding at profits, so i am turning to rentals which  always peaked my interest, but never really made an effort to follow through.

So my idea is to buy a 2 storey house in the downtown core of Toronto, which there is a huge demand for rentals on the higher executive end, and very low vacancy numbers. My idea is to build up a 3rd storey and add an addition to the back of equal length as the original house. It has been done already, actually rite behind my moms place, and he essentially set precedent for the neighborhood that only has 2 storey homes.

My main question is what are some pitfalls in all of this that can arise, what should i look out for, and other details should a look for?

Financials.

2 storey is about $1,000,000

20% down

$800,000 finance

$500,000 for 8plex reno and running costs

Can gross from $16,000 to $21,000 monthly depending on how i build up the property.

Plus the city is allowing residents to convert garages into living space, so i can make a 2 storey garage and have 2 bachelors. Essentially converting a Duplex property into a 10 unit property.