New Build Duplex Complete! With Pictures
18 June 2020 - Final completion inspection passed at our new build duplex! It’s been a long year of building, but our latest investment property is ready to rent. Here’s the story of how we designed and built our very own duplex.
THE INSPIRATION
In 2017, we had just finished the remodel of our first home, a 3/2 house built in 1936 with a detached ADU, and I just thought there had to be a better way. It was our inaugural personal project but it was a difficult rehab that still ended with unlevel floors, 4" exterior walls with little insulation, bad original bones, and a huge toll on our time and energy (I gave birth to our first child during the drywall phase). We are no strangers to construction, I'm a construction management major and worked for a commercial general contractor at the time, so my expectations were not out of line and I realistically understand what it takes; I was just fed up with bad, old houses. While we looked for our next investment, I said to my husband "let's build a duplex!" Our friends had just finished their new build duplex project so we knew it could be done and they led us to some good contacts.
FINDING THE PROPERTY
Vacant city lots zoned multifamily don’t really exist, but we mailed the owners of an empty lot that was in the corner of a 2013 created subdivision. My dad knew about this lot from just knowing his neighborhood and remembering that it existed from back in the development phase. The owners responded back to us and we took their asking price of $100,000 paid in cash. That closing date was May 24, 2018.
PLANNING THE DUPLEX
The next year was the planning year. I really love thinking about the design, and we had to educate ourselves about the zoning and design requirements, and work on our budget for the bank. It doesn’t take a year to plan, but during this time we almost sold the lot to spend more time with my dying father and then he passed away. I also gave birth to our second child. After all that, we went back to the City to pick up the permits and spent about $60,000 just on permits and fees to municipalities. Building two units didn’t save us any money on fees, especially since we wanted individual hookups for water and sewer. We did our design with our friend’s drafter and then had it engineered, and even included a special landscape designer, totaling about $5000 in design fees.
FINANCING
For financing we used the same local bank that we used for our house remodel with the same construction loan product. Washington Federal is a portfolio lender and allowed us to be the “owner builder” because we have construction experience. Because of this we could do the work ourselves, and draw the fund directly and not have to go through a general contractor. I found this bank to be the only one set up this unique way. Also, after the one year of construction and interest only payments, the 4.75% loan automatically converts to the permanent 30 year fixed.
We got a construction loan for $445,000 and didn’t have to put any money down since the $100,000 cash we paid for the lot was the equity. We did have to front the payments to the subs since the bank only paid after they confirmed the work was done.
THE CONSTRUCTION
Just like our friends did, we hired the same general contractor to complete the first half of the project until it was dried in - up to the point of siding and roofing. We weren’t familiar with groundwork or framing yet, so it was super helpful to have him managing all those subs for us. His portion of the construction was about $210,000.
Then we brought in the plumber and electrician, the drywall guys, flooring sub, painters; all people we had a previous relationship with in the construction world. And being an estimator at work, I am well versed, though not perfect, at getting scopes of work created and subcontractors priced and to the jobsite. My husband is a carpenter, and we did all the cabinets, trim and doors, and finish carpentry of the project. To our detriment, we aren’t the fastest workers and we were very busy during the last four months of duplex construction with another house flip project, six apartment vacancies, another two unit purchase, along with waiting through pandemic vendor delays.
THE RESULTS
So with the goal of getting a great investment, was this really the best way to go? We are super happy with the end product and knowing that it is a brand new multifamily with no capital expenditures or repairs in the new future. We know the bones of the house are great and the structure is solid. We know that we have a sparkling great home that will attract great renters, and mostly, we are super proud of it. Our total into the project is $545,000, and before construction it appraised for $565,000. I imagine that it would appraise for $675,000 or more today, but it’s hard since there is nothing to compare it to, and we don’t plan on selling it anyway.
For rent, we are asking $2200. I do think it’s on the high end, but that’s who we are attracting, and also, there is nothing else like it on the market today. https://www.zillow.com/b/1733-hillcrest-loop-mount-vernon-wa-9P7X72/
REVIEW
Because of our construction background, I think it was a perfect project for us. We learned so much dealing with inspectors, schedules, and subcontractors. Even my background in construction management pales in comparison of doing your own personal project. We didn’t alway know what questions to ask during the process, but this gave us the education we wanted, as we do want to do more new build projects in the future. Was it a slam dunk investment? Probably not. We spent a lot of time on this project (time = money). Should everyone go build one? No. We are fortunate to have the time and ability to take on the project. It was a full time job for my husband at some points, who luckily has the skills and tools, and we love the process. There is so much to discuss, so many things we could have done better, but it satisfied the itch and answered the questions of is there a better way to acquire investments.
