Investor · Windham, ME · Member since 2016 · 180 posts · 37 votes
I currently have a property with a 4 unit on it. I can build 12 more units. I’m torn between building 6 duplexes or a bigger building instead of multiple duplexes. Has anyone had recent experience in this or recently seen the numbers on which is more cost effective? Also, It can’t be subdivided and the duplexes won’t be able to be sold off individually. All 16 units would have to remain on same lot/deed forever (so in terms of value, I can’t capitalize on the duplexes being sold to conventional non commercial buyer) think financially it would be nice to phase it out one duplex at a time. But seems efficient to go with a 12 unit or 2 six unit buildings. Maybe the construction costs would end up being the same no matter how it’s done, but I haven’t done much new construction last few years, I’ve just been buying existing stuff, so I just don’t know. thanks!
A larger multifamily build would generally be more cost efficient as you have less exterior footage and can combine MEP systems. Being able to phase the duplexes is a nice advantage however. I would say take a deeper dive into the nearby product and see if there is a premium in rents for a duplex unit versus an apartment.
That is an option. They can be turned to condos at anytime. There’s no town involvement when it comes to condo conversions. But i plan to hold and rent.
A larger multifamily build would generally be more cost efficient as you have less exterior footage and can combine MEP systems. Being able to phase the duplexes is a nice advantage however. I would say take a deeper dive into the nearby product and see if there is a premium in rents for a duplex unit versus an apartment.
Unless apartments are just not as marketable, then a multifamily building is likely the most efficient for construction expense, operating expense, and rent/SF.
With a building of only 12 units, I doubt you'll see any time-based advantage by phasing in duplexes. Just one stat, but: 2023 Apartment Construction Times. If this holds for your project, then you're looking at only a few months longer to get 12 units than 2.
You may have a more profitable exit if you can build them as 1-4 units versus larger and can subdivide the buildings into separate properties. A 1-4 unit will qualify for residential mortgages while 5+ is a commercial mortgage. The 1-4 unit buildings will have a larger buyer pool and maybe a larger price per unit as a result.
You will probably attract more families / long term renters with duplexes than with one 12 unit building. What is more in demand in your area? If you have a lot of young professionals, the 12 unit might be the way to go. If you have more working class families in your area, then I would personally lean toward the duplexes.
The duplex route would be more maintenance, 6 roofs vs 1, etc. It all depends what works best for you personally and what your long term goals are for the portfolio.
@Matthew Wright Check to make sure your town doesn’t have any zoning restrictions on how many units you can have in one building. In my town you have to get a zoning variance if you want more than 5 units in one building.
Thanks Gino, Hi Matthew, without being able to do separate deeds, the 12 plex would likely be the most cost efficient but you will also need to consider the layout of the overall property, where as two 6 plexes may lay out better and more functional, and therefore attract a higher rent and desirability. Duplexes will cost more but could also yield a higher rent per unit, you need to comp those numbers and see if the higher build cost would make sense due to potential higher rent coming in on duplexes. Be sure to have plenty of room for parking, as this can kill the functionality of the overall complex if you don't. Hope this helps
Everyone has spoken about how a single building would be most cost effective to build and they're right.
However, what if you were able to get more rents for standalone duplexes? Do people in your market pay more to not be living wall to wall? Can you market the property as a luxury and walkable community? The goal is to earn the most money, not do something the cheapest way possible. Though those goals are often interconnected.