The hidden costs that surprise almost every new plex owner

The down payment is only the beginning. What surprises most people are the expenses you do not see coming before already being an owner, and the false beliefs you carry without knowing it, like thinking you can raise a rent however you want. Better to know everything in advance, with real numbers, not just vague warnings.

Before even signing: the fees people forget to budget.

The transfer tax (often called the "welcome tax") is added to the purchase price. It is calculated in brackets, generally between 0.5% and 1.5% of the purchase price, and rises on the higher brackets in Montreal. On a $400,000 duplex, count often between $3,000 and $5,000, payable a few months after the transaction: set it aside at signing.

A pre-purchase inspection generally costs between $800 and $1,200 for a small plex (more than a single-family home, since there are more units and systems to check). An expense that can save you tens of thousands of dollars in bad surprises.

Notary fees and adjustments often run around $1,000 to $2,000 for an income property, plus the day-of-sale adjustments (taxes already paid by the seller, transferred tenant deposits), which can add a few hundred to a few thousand dollars depending on the time of year.

After signing: the expenses that arrive without warning.

Income property insurance costs more than residential insurance: count often between $1,500 and $4,000 per year for a small plex, sometimes more if the building is old or heating is still oil-based.

Routine maintenance (snow removal, lawn, minor repairs) is budgeted every month. A snow removal contract often runs around $300 to $800 per season, and general upkeep easily adds a few hundred dollars more per year.

Rental vacancy, even of a few weeks between two tenants, is a real loss. Rule of thumb used by several investors: budget 3% to 5% of annual rents for vacancy, even on a building that rents well.

An unexpected compliance upgrade (electricity, heating, fire safety) can arise even on a building that looks fine: from a few hundred dollars for a missing smoke alarm, to $3,000 to $8,000 for a complete electrical upgrade.

Managing it yourself or paying to offload: the real cost of management.

Many first-time investors manage everything themselves to save, without comparing the real cost of their time to delegated management.

Managing yourself costs nothing in direct fees, but takes time: calls, upkeep, lease renewals, tenant search. Perfectly feasible for a duplex or triplex, especially if you live there, but more demanding as the number of units grows.

Paying a management company generally costs 5% to 10% of gross monthly rents for a small building (often 4% to 6% for 6 units or more). It usually covers rent collection, communications and routine maintenance, but not always everything: ask what is included.

Finding a new tenant has a real cost, whether you do it yourself (time) or through an agency (generally 50% to 100% of a month’s rent). A bad tenant choice, made in haste to save these fees, almost always costs more in the end.

Good to know: these management and leasing fees are deductible from your rental income for tax purposes, which reduces the real cost.

Raising the rent: it is not as simple as you think.

It is probably the biggest false belief among new plex owners: several think they can raise the rent every year however they want. That is not the case. Precise rules, with strict timelines, govern rent increases in Quebec.

The notice must be sent at the right time. For the majority of one-year leases, the notice must be sent in writing between 3 and 6 months before the end of the lease. Sent too late, it is simply not valid, and you wait until the next renewal.

The amount is not arbitrary. The Tribunal administratif du logement (TAL) proposes an official calculation method, based on the consumer price index, the variation in taxes and insurance, and the cost of major work. It is not a "felt" number: the TAL tool lets you calculate it correctly.

The tenant has the last word, so to speak. On receiving the notice, they can accept, refuse and stay, or refuse and leave. If they do not respond within the required timeframe (usually one month), the lease is deemed renewed under the new conditions. If they actively refuse, you must go to the TAL to have the rent set, with your numbers to back it up.

Concretely: an improvised increase can be refused or contested, delaying your expected income by a full year. A well-calculated increase sent at the right time almost always passes without issue.

How to build a real financial cushion.

The simplest rule: set aside a percentage of the rents collected each month (several investors aim for between 5% and 10%) in a separate account, reserved only for the building. This cushion turns an unexpected repair, a vacancy or a management fee into a simple planned inconvenience rather than a financial crisis.

Another, lesser-known lead: the cash-back mortgage. Some banks offer a lump sum paid at closing (often a percentage of the loan), in exchange for a slightly higher interest rate. It is not free, but for an investor who needs a starting cushion, it can make all the difference from day one, rather than waiting to accumulate that cushion rent by rent. And remember: on an income property, the interest paid on the mortgage is deductible from your rental income at the end of the year, which lightens part of the cost of that higher rate.

What to remember.

None of these expenses is dramatic on its own, and no rent-increase rule is an impossible obstacle: it is simply a framework to know. What creates stress is not having budgeted for them, or wrongly believing you have more freedom than you actually do. A well-informed first-time investor, with real numbers in hand and a real cushion, is never truly caught off guard: only prepared.