Self-build multi unit homes - does it make sense?

Question

Hello everyone! I am a newbie to Canadian markets. We are moving to halifax NS shortly and I'm looking for build a property portfolio there. We had a small portfolio here in UK, its all sold and I have about CAD 500k to start with. I'll be jumping full-time into real estate investing now.

Has anyone done or considered buying land and building your own multi unit properties? It can be built to specification (minimum wasted space) and I could save on maintenance long term if the build is done to a good quality. So the plan is to buy land, build, rent it out and then finance it to release money. Repeat.

If anyone has done this, please could you share your experiences?

Jason Dobbins · Answer

For me the cost upfront are to high, as you said less maintenance which is nice but I think your time till you see cash flow is a longer road than buying something 15 years old.  Currently in my Market there is a 2 unit duplex built 15 years ago its priced about $60k below what build cost would be. I also think this depends on how many units your looking and the cost of land.  I am also not familiar with the building cost in Canada so it could be cheaper than in my market

Hai Loc · Answer

Welcome Jasmine. I have never done this but would love to. My market is too expensive and would need to either raise money or partner up. You should be able to start something with $500k in the maritimes.

When you build a multi family you automatically should be an A Class building as a new built and your location should determine if you an A Class asset overall.. This will give you the lowest cap rate for multi family in the area. Having said that as an A Class Multi Family building you will get the highest value for the income the building generates.. To me nothing gets better then that..

Once your building is stabilized and fully occupied you can definitely go to a bank get an appraisal, refinance and move on to the next one

Good luck

Kris Bucci · Answer

Jasmine, first off welcome Canada and secondly welcome to BP.  For the past couple of years we focused on purchasing near turn-key properties both personally and with JV partners.

We have decided to move into the development side for the next few properties. We live just outside Victoria and for us we believe we’ve found an area where it makes sense.  We feel we can buy land and build a 3up/2down duplex for under 500k, with the after repair value around 625k.  Basically we should be able to refinance all or most of our down payment out. As well, these properties would rent for 4K + out here giving you over 1k cash flow a month.

All in all depending on your land cost and ARV, I feel it can be a great way to get into the market.

Jasmine May · Answer

Thanks for your response Jason.

Mods, please can this be moved to Canada section?

Self-build multi unit homes - does it make sense?

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