Whats required to legally change a house from a duplex to triplex

[Ryan F.]

Hello,

So I'm new to this whole thing and I'm looking for some advice. Red flags keep popping up for me but I don't know how valid they are. I'm currently looking at duplexes and triplexes in ontario. I plan on living in one of the units. I found a property listed as a duplex. One 3-bedroom apt, One 2-bedroom apt. I ended up going to go see it. It turns out that there is a 3rd unit in the back. It looks like the upstairs apartment was a 3 bedroom but was then converted into a 2-bedroom apartment and a bachelor apartment. There is a separate hydro meter run for it but it is disconnected because the owner said something about animals chewing the electrical wires in the attic. The roof was apparently fixed stopping animals from getting in but the electrical wasn't. I'm assuming this to be a $5000 fix. I think it might be an illegal unit as well since the property is being sold as a duplex.

From what my spreadsheet tells me, If i rent out that 3rd unit my cap rate would end up being about 5% with a theoretical cash flow of about $425/month. Assuming vacancy rate of 8.3%(double what my city's average vacancy rate it), and $3000/year in maintenance/repair/capex gives me a COC ROI of 5.13% but a total ROI of 10.03%(In terms if improvements to the building this number only assumes $5000 for the electrical fix but not the cost for making it a legal triplex). Other assumptions of revenue increase of 2%/year, operating expense increase of 2%/year and annual appreciation of 0%/year.

Some additional info and red flags. Owner is a numbered company. I put an offer down on it with some conditions and they came back with a counter offer removing a whole bunch of the conditions. Some of the conditions they want me to waive are: Phase 1 & 2 environmental study, they cant provide me with current tenant leases, can't provide building plans, surveys, fire certificate, previous building expenses. The last red flag was that the seller wanted me to make my ability to secure a mortgage/insurance/inspection conditional only for 10 days including holidays and weekends which is like 7 business days max. I've been pre-approved for a mortgage from a bank however but I dont know how that works for multifamilies

I ended up speaking with one of the tenants and they are the ones who told me about the electrical in the 3rd unit, the fixed roof. They also told me the owner/landlord doesn't care about the building at all.

I have so many questions I don't even know where to start so I'll just list some off.

1. What kind of costs can I expect to convert this from a legal duplex to a legal triplex. How would I begin to start the process? The area is zoned R4E. Since the unit is already built could I expect maybe 15k in fees or like 50k?

2. How would insurance handle it If I personally lived in the illegal unit.

3.How are mortgage rates affected for owner occupied duplexes/triplexes? I'm wanting to put 20% down minimum. Would I still get the interest rate of a single family home? Am I forced to get CMHC insurance?

4. Since the owner cant provide a fire certificate would a home inspector be able to tell me about fire code violations? I know the illegal unit on the 2nd floor only has 1 way out through the main door but would a window fire escape ladder that you can buy at home depot suffice as another way out of the unit?

5. Typically how long does it take to get a place inspected+insurance+mortgage.

6. Is this a bad deal? I think it might be but I'd like other peoples input. I feel like the owner is just trying to offload this building to a sucker.

Last but not least. my last red flag is with my realtor. Hasn't been able to spell my name correctly in 3 house offers even though I send my full name every time through email and correct it on any signed papers given to me. If this person can't take the time to spell my name correctly then I doubt the letter of offer is done correctly either.