Building a duplex...living on one side, renting the other side.

Des Moines, IA · Member since 2014 · 30 posts · 2 votes

Are there a lot of you all out there that do this? We found some lots in a new neighborhood that has both, new houses and new duplexes. The duplexes all look the same, probably same builder, I was wondering if you all found this as a good investment. Thanks for your time in answering!!

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Karen MargraveBusiness Member

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Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes

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@Bryan Wilson The million dollar question is, if there is only one lot left in the subdivision, why is the builder selling it and not building it out himself? You want to be sure that the lot is actually buildable and will meet all current zoning and building requirements, such as usable land, etc. You mention that it's a new neighborhood, therefore; it should all work.

The obvious builder is the current owner as they already have approved plans that have been through plan check, etc. and will shave off time. They also have a proven product so that the values have already been set. However; IF the builder isn't interested in building out the lot for you, find out if you can purchase with an approved set of plans for that lot. If that lot requires a different set of plans, if you know the architect or designer that drew the plans, and the builder allows it, they can probably modify plans for that lot and save time and money. Good luck.

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Brie SchmidtBusiness Member
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Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
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@Bryan Wilson - are you planning on buying an empty lot and building a duplex or buying a brand new duplex and living on one side?
If it is the latter, I strongly suggest it. You can easily get a residential loan with owner occupied terms and have the unit pay a good portion of your rent if you buy it right
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Jeremy Tillotson
Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
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@Bryan Wilson usually around here the builders own the lots, so either they build or charge you 20% more for the lot. I am looking at doing some small duplexes and condo them out in the next year or two.
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Bryan Wilson
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Des Moines, IA · Member since 2014 · 30 posts · 2 votes
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@Brie Schmidt thanks for replying. We are planning on buying the empty lot and building. The lots are owned by a construction company who I assume has built all the homes and duplexes in that neighborhood. So I am also assuming they would be the builder if we went that route. They haven't returned email or phone call yet.
@Jeremy Tillotson yeah I think they are the builders. I don't mind as I don't have a builder in mind and the work I've seen, the other homes and duplexes, are really nice. We will be going inside one this weekend to get a better look.
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Jeremy Tillotson
Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
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@Bryan Wilson I must ask then are these condos? They may not allow rentals, and if so the builder wont want competition selling there condos. You can often find the last lot of a finished subdivision fairly cheap (maybe stopped building 2-4 years ago, I frequently pick these up with 50-70% discounts.
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Bryan Wilson
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Des Moines, IA · Member since 2014 · 30 posts · 2 votes
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They are duplexes. I'll snap some shots and post em.
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Brie SchmidtBusiness Member
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Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
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@Bryan Wilson - Ok, be aware that vacant land is hard to finance and you might need to just buy the finished product from the builder.
Ask if there is a homeowner's association being set up and if so, who will be running it. They might have restrictions on rentals as @Jeremy Tillotson said among other things (my sister in law didn't ask details about her homeowners association which does not allow fenced in yards so now she has to walk her 80 lb dog with her 2 year old and 9 month old kids)
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Andy Mirza
Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
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Is there a specific reason why you want to buy new construction vs an existing duplex? Typically, new construction will cost more per sq ft than existing structures. Remember to add the cost of the Iot to your construction costs to get your total cost per sq ft when you do your comparison. You probably won't see an equivalent amount in a rental increase if you're paying a premium for new construction. I don't know your specific market so these are just generalizations.
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Karen MargraveBusiness Member
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Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
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@Bryan Wilson The million dollar question is, if there is only one lot left in the subdivision, why is the builder selling it and not building it out himself? You want to be sure that the lot is actually buildable and will meet all current zoning and building requirements, such as usable land, etc. You mention that it's a new neighborhood, therefore; it should all work.
The obvious builder is the current owner as they already have approved plans that have been through plan check, etc. and will shave off time. They also have a proven product so that the values have already been set. However; IF the builder isn't interested in building out the lot for you, find out if you can purchase with an approved set of plans for that lot. If that lot requires a different set of plans, if you know the architect or designer that drew the plans, and the builder allows it, they can probably modify plans for that lot and save time and money. Good luck.
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Franklin Spees
Property Manager · CA · Member since 2012 · 76 posts · 54 votes
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I was thinking the same thing @Karen Margrave . There is usually a reason for builders leaving remnant lots. If the deal was that great they would likely build them out themselves. Now there could always be a logical reason (lawsuit, sold company, someone died, or some other explanation). Might want to gather info from the seller/builder and then head over to the planning department and corroborate and do your own due diligence.
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Bryan Wilson
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Des Moines, IA · Member since 2014 · 30 posts · 2 votes
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I want to thank you all for the great information and advice. I've learned so much from this website.
The owner of the remaining 3 lots, Fleetwood Homes, finally got back to me and unfortunately they already have plans to put new homes, not duplexes on those lots. Bummed me out. He said if I would have contacted him last summer he would have worked with me on the one lot that is next to other duplexes. They break ground in the spring on the 3 homes.
@Karen Margrave yeah Fleetwood Homes owned all the lots/land in that subdivision and these were the remaining 3.
@Andy Mirza the area these lots are in are in the school district we want to be in. It's a small town, Carlisle, Iowa just outside of Des Moines. This subdivision is just off of a nice lake Easter Lake and the city is doing many upgrades to the area. just a very pleasant place to be. The current duplexes that are there are really nice. They aren't townhomes. They rent for $1500+ and most are rented by people in their 50s and up. I'm guessing the home owners in the area don't mind as these duplexes really look upscale.
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Andy Mirza
Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
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@Bryan Wilson That's too bad. Sorry...
You've got the right idea about house hacking. Hopefully, you'll find another 2-4 plex in an area that you want to live in. If you don't, you're still allowed to find a nice SFR for your personal residence! It's OK....
Good luck!
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