PDX - existing SFH, build additional 3 units in back...?
Purchased a SFH in Portland Oregon zoned RH (multifamily) in January that sits on about half of a 3700 SF lot.
The house was in poor condition, but did pass appraisal and qualify for a loan (after laying temp carpet and stick on vinyl squares myself one weekend and doing some painting on some facia boards...), and has good bones.
1 BD - 1 BA - 600 Sq ft.
Purchase price ~190k
Renovations ~30k - new kitchen, remove chimney, knockdown and redo walls around chimney/kitchen, new ductless HVAC, hardwoods, Redo bathroom, full interior paint, Full replumb, updated electrical. Rented as of mid April.
All in - ~220k
Cash invested ~80k
PITI - ~$950
rental income ~$1300/m
I figure about break-even cash flow going forward , and could likely sell as a SFH without consideration of development potential for ~250k conservatively.
So far so good.
Due diligence with the city has led to the understanding that I can build up to 3 additional units in the back of the lot, with a building permit, as long as we meet development standards, setbacks etc. We are lucky that it is a corner lot, so there is access to the back via another street. There are obstacles to splitting the lot into separate town homes etc, so it appears having a quadruplex or Triplex will be the only option.
With setbacks taken into consideration, I have approximately 38' x 32' of space to BUILD on.
Grappling with these questions now -
1) more units better always? Even if meaning fitting 3 vs 2 means they are a little cramped, less private, less desirable. This will never be as desirable as some areas in Portland, although the location is convenient, it is right next to the I5 freeway sound wall.
2) plans/architect - I'm assuming we will need custom plans drawn up by an architect, vs having some generic design plans. It's a small space to fit 3 units, and with a sound wall facing you, some design consideration seems needed.
3) Build to hold and rent - construction financing - putting together a proforma - Have talked with umpqua bank about construction loan....seems basically only available in a non owner occupied if I can stay below Jumbo (417k total), my thought is if I go this route, I would pay out of pocket whatever the difference is to stay below this threshold.
1st draft proforma
build costs at ~300k,
total invested of ~520k, lets say ~550k all in. - PITI = ~$3000
4 units gross rents estimated at ~$5000.
4) VS build to sell. Obviously opens up more opportunities for investor financing etc.
Build costs ~300k
total invested ~550k
Estimated Sales Price - ~750k (very few comps on anything like this, this is super guess).
5) GC - act as it myself......? Bad idea? I don't have construction experience beyond this renovation.
My thoughts are that if I can fit into a traditional financing situation to keep and hold, long term this will pay off a ton. I will have hopefully manufactured a cash flow positive situation in a place where current cap rates make that hard to do.
Thanks for any thoughts on this.