188-190 Caroline Street S is a legal fourplex in Hamilton's Durand Neighbourhood, listed at $1,149,000. All four units are leased. Together they bring in $91,650 a year in rent and $75,189 in net operating income, which works out to a 6.5% cap rate (MLS 40862614).
That's the short answer. The rest of this post is what sits behind those numbers, and who I think this building suits.
The numbers, door by door
Divide the price by four units and you get $287,250 per door. Rent works out to about $7,637 a month across the building.
The gap between rent and NOI is $16,461 a year. That's roughly 18% of the rent going to running costs. It's a lean number, and a big reason is that all four tenants pay their own hydro, so a cold January doesn't land on your statement.
Don't take any listing's NOI on faith, including ours. Run it again with your own vacancy, repairs and management costs, the way we lay it out in our underwriting standard for NOI, cap rate and debt coverage. Then check the price per door against Hamilton's duplex, triplex and fourplex asking prices by neighbourhood.
Before any offer on a fourplex, I want the rent roll and each lease in writing, with start dates. Rent on a listing sheet is a claim. A signed lease is a fact.
Four tenancies keep the income steady
The mix is one 3 bedroom, one 2 bedroom and two 1 bedrooms. That's 7 bedrooms and 5 bathrooms over 3,256 square feet.
With one big unit and one tenant, a single move-out means zero income that month. Here, if one tenant leaves, three are still paying, and your mortgage still gets covered while you find the next person.
The spread of sizes helps too. The 1 bedrooms suit a single nurse or a grad student. The 3 bedroom suits a small family or roommates. Each unit has kept its own character, and that matters more than people think, because tenants who like where they live tend to stay.
The takeaway: four separate leases in a tight rental pocket is about as close to steady as rental income gets in Hamilton.
The expensive work is already done
Old Hamilton brick buildings have a short list of costly surprises. A few of the big ones here have been dealt with.
The parapet walls and the chimney have been rebuilt. The water line has been upgraded to 3/4" copper. Parking for 4 cars sits at the rear, which is rare on these downtown-edge streets and something tenants will pay attention to.
None of that shows up in a photo. It shows up when you aren't writing a cheque for it in year two.
Why Durand rents the way it does
Durand is one of the tightest rental pockets in the city. Caroline Street S is a quiet, tree-lined street, and from the door you can walk to Locke St S, James St S, Hess Village and downtown Hamilton, with St. Joseph's Hospital close enough that hospital staff can skip the car, which is exactly the kind of tenant who stays put for years.
Transit, parks and schools are close as well. That's a wide pool of people who want to live here. A wide pool is what keeps vacancy short.
If you want to compare this with other buildings, you can see more on our Hamilton investment properties page.
Who this fits, and why now
This suits a buyer who wants income from day one and doesn't want a renovation project. It also suits someone who'd rather own four doors in one building than four condos spread around town.
The upside is real. Two of the four rents are under market. You buy at today's 6.5% and the numbers have room to grow over time as those units turn over.
That's the honest pitch. A working building, the big repairs behind it, and some upside built in.
Questions people ask
How much down payment do I need for a fourplex in Hamilton?
An investor who won't live in the building should usually plan on at least 20% down with a regular lender. If an owner lives in one unit of a three or four unit property, CMHC rules allow as little as 10% down. In that case, up to 50% of the gross rent (or the net rent) can count toward qualifying.
Does the 6.5% cap rate include my mortgage payment?
No. Cap rate is NOI divided by price, and NOI is counted before any mortgage. Your actual cash flow depends on your rate, your down payment and your amortization, so test it with your lender's real numbers.
Can I raise the two under-market rents right away?
For most existing Ontario tenancies, rent can only go up once every 12 months, and usually by no more than the provincial guideline unless the unit is exempt. When a tenant moves out on their own, the rent can be reset for the next tenant. That's why the upside here is a longer-term gain, not a quick one.
Book your private tour
Photos, details and showing times are all on the listing page. Book a private tour of 188-190 Caroline Street S this week. If you'd like to talk through the numbers with me first, you can read a little about how I work and reach out from there.
Sandy MacKay, Found Spaces Realty Group