Vol. 4 — How to Save a Dead Deal: Two Paths, One Lot
Last week, I posted a duplex deal that flopped hard.
Solid street. Clean layout. Real design plans.
But the numbers? Total disaster.
Still, I couldn’t shake one question:
Could this deal work… if I approached it differently?
So I explored two alternate paths — same lot, different strategy.
Let’s break them down.
Quick Recap: The Original Deal (Dead on Arrival)
- Land Cost: $479,000
- Build Cost: $782,500 (3,130 sqft × $250)
- Soft Costs + Contingency: $172,150
→ Total Dev Cost: $1,433,650
Rental Income:
- $2,750/unit → $5,500/month
- Net Operating Income: ~$43,800/year
- Debt + Carrying: ~$43,000/year
→ Negative cash flow from Day 1. No rent upside. No exit plan.
That deal’s dead.
Scenario 1 — Rezone and Build 4 Units (Hold & Rent)
This is the higher-density, long-term play.
Instead of building a duplex, I’d rezone and construct a legal 4-unit building — either as stacked towns or a fourplex.
Updated Costs:
- Land: $479,000
- Build: 4,000 sqft × $270 = $1,080,000
- Soft Costs + Contingency + Rezoning Legal: ~$350,000
→ Total Dev Cost: ~$1.91M
Rental Income:
- 4 units × $2,250/month = $9,000/month
- Vacancy (5%) = -$5,400/year
- Operating Expenses (30%) = -$32,400/year
→ NOI: ~$72,200/year
Valuation:
- Cap Rate: 5%
- $72,200 ÷ 0.05 = $1.44M valuation
Verdict:
You’ve spent $1.91M to build something worth $1.44M.
Even with 4 units, you’re deep underwater.
Holding this as a rental doesn’t work — even at full density.
This version? Still dead.
Scenario 2 — Build the Duplex and Sell the Two Units (Merchant Play)
Now we shift to a build-and-sell strategy.
Keep the duplex form, but split the units and sell each one as a freehold or condo townhome.
Costs:
- Total Dev Cost: $1.433M
- Legal/Severance/Condo Setup: $75,000
→ All-In: ~$1.508M
Sales:
| Sale Price per Unit | Gross Sales | Net Profit (after selling & legal fees) |
|---|---|---|
| $725K | $1.45M | ~$50K loss |
| $750K | $1.5M | Break-even |
| $775K | $1.55M | ~$40K profit |
Margins are tight, but this version has a clear exit and a defined timeline.
Verdict:
If resale prices hold and execution is clean, this deal can break even or turn a modest profit.
Not a slam dunk — but it’s workable.
What This Taught Me
Here’s what I’m starting to realize:
Maybe building to sell isn’t just a backup plan.
Maybe it’s actually the safer bet for a first deal.
As a first-time developer:
- I don’t need long-term rental headaches.
- I don’t need to pray for appreciation.
- I need a clean exit and capital back in my hands.
When you build to rent, you’re tying up money for years — and if your numbers suck, there’s no escape.
But when you build to sell? You know exactly how and when you’re getting out.
This deal only worked when I stopped thinking like a landlord
—and started thinking like a builder.
The Final Word
Same lot. Same building footprint. Two strategies:
| Strategy | Total Cost | Exit | Outcome |
|---|---|---|---|
| Rezone + 4 Units + Rent | ~$1.91M | Hold | Deep negative — fails |
| Build Duplex + Sell | ~$1.51M | Sell | Breakeven to ~$40K profit |
Sometimes it’s not the land that’s wrong.
It’s the plan.
And honestly?
I’m starting to wonder how much money can even be made with building to rent in Ontario.
So let me ask you this:
If you’re building in Ontario… are you actually investing?
Or just subsidizing a project the numbers don’t support?