Building a Duplex in Michigan

3 Replies

I currently live in Southeast Michigan (closer to Ann Arbor) and I was wondering what the potential/options are for building a new duplex to "house hack" (live in one, rent the other)? I know it will probably depend on the city and whether they'd allow construction, but I was wondering if anyone has had experience building new multi-family homes within the past 5-10 years. 

I simply cannot find anything worth purchasing on the MLS/Realtor websites that fit my criteria.

Any recommendations for the following would be greatly appreciated...

- Most cost-effective location to build

- Builders

- Design/Planning/Architecture

I'm sure there's a reason why there aren't a lot of new multi-families being constructed...I'm hopeful this might lead to something though!

Your biggest hurdle is going to be zoning. In any prime area in a good city (i.e. Ann Arbor), any property zoned multifamily that's suitable for new construction is going to be sold at a steep premium.

I have no experience with new construction costs, but my aunt just built a duplex and said she came out underwater on it right out of the gates (it's worth less on the market than she spent building it). Of course that's not always the result, but it's not easy to build cost-effectively and well, especially without experience.

@Cyle Lublin I believe the reason you don't see more new construction duplexes comes down to economics and buyers pool.  A single family house will always be worth more than a duplex on a $/ft2 basis, but yet it costs more on a $/ft2 basis to build the same level of finish.  So builders will make more money building a single family vs a duplex. There are also alot less people that want to be landlords than just plain homeowners.

If you were to build, you would need a construction loan. Most construction loans would require you to put up 20-25% of total costs, so that is also a big deterrent. While you might be able to find a builder to build a duplex on spec for sale to you (thus you avoid the construction loan and the huge down payment), it would most likely be hard.

As other stated, there are some zoning issues, but it is not normally an issue, you just have to find the right piece of land. I disagree with the other comment that land zoned for duplexes is more expensive. Generally land is zoned duplex or multifamily is in lesser priced areas.

You do have to be careful that that area you want to build can support new construction pricing, particularly in 2-4 unit properties.  Otherwise, you could finish construction and be upside down.  This has more to do with the area, than the costs of construction.