looking into building a duplex

11 Replies

Hi BP,

I am exploring the idea of building a duplex. I would like to connect with some other investors that have done similar projects in their local market. Just looking for what others have experienced when doing this type of build. I am looking into building something simple side by side identical units 2 bed 1 bath 1 car garage around 900 square foot each. Any advice or input is much appreciated. 

Hey Chris,

I’m really interested to see how this materializes for you. I’ve had similar thoughts and would love to learn from your experience.

When you mentioned “side-by-side”, I thought of a warning from @Brandon Turner that might be relevant here. On page 189-190 of “The Book on Rental Property Investing”, he specifies that there are only three problems he avoids when considering a rental property:

(1) a bad neighborhood

(2) foundation issues

(3) SHARED DRIVEWAYS

The one that I think is relevant for you is #3, SHARED DRIVEWAYS. Since you’re the one creating this duplex from the ground up, being aware of this potential problem from the start might save you a headache in the future.

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Here’s what he says about shared driveways (quoted from page 189-190 of “The Book on Rental Property Investing”):

“I once bought a nice house in a nice area that shared a driveway with a neighbor’s house. Literally, the two houses were 20 feet apart with the driveway in between, split evenly down the middle into “their side” and “my side.” When I bought the house, I didn’t see any issues with this situation, but within a few months I learned a terrible truth: the neighbor was a driveway hoarder.

"He started to pile up garbage, boats, engines, tires, and everything else you could imagine in the driveway. Although he was polite enough to keep his junk on his side of the shared driveway, it made my property look incredibly bad, and we had a terrible time trying to rent or sell it. The junk in the neighbor’s driveway reduced the value of my property by 20%, and there was nothing I could do about it. Now I don’t buy properties where the neighbor could so easily affect my bottom line.”

This information is duplicated in the following BP article:

https://www.biggerpockets.com/renewsblog/3-problems-avoid-shopping-rental-property/

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Are you looking to build this duplex in Omaha?

Hope this helps,

Shawn

I'm considering the same. Would love to hear how it goes for you or from others here who have built multifamily buildings.

I'm in the same boat. Would love to hear more about this.

So, this is just my 2 cents, but why build so small? If you are going through the hassle and trouble of building in the first place, why build something that will get you less rent when you could potentially increase it by 2-300 sf and add a third bedroom to each. 

Personally, when I finally flip myself into a position where I can buy and hold, I won't look at 2/1 unless its a steal of a deal. 

My dad just built a duplex. He is a GC and he partnered with another guy. I’m pretty knowledgeable about investment strategies and there is something to be said about the red tape. Why not go bigger?
But I think he will make a little money, and he also keeps his crews busy during the process which can be nice to have a project that’s flexible.

I’ll let you know how it goes. The market here is pretty warm, so I don’t think he will have a hard time selling and hitting his margins when he sells in the spring.

@Ben McMahon I would be interested to hear the numbers when its all said and done if you are willing to share. My thought process for building a duplex is... first I bought a duplex about 6 months ago and it has been a great property for me. It rents much like a single family home (less hassle and less hands on) but I get the the bonus of having two sides to rent. I would like another one but in Omaha they are commanding a pretty good price in relation to the rent (for something built for purpose).  That why I wanted to look into building. I kind of figured it may be cost prohibitive to do so but thought I would at least look into it. Another reason I wanted to explore the idea is, as an agent I get a decent amount of clients looking for small multi family so there is a strong demand here but not much for good inventory. So my intent would buy to build and hold the property but would also consider selling them. I have not seen anyone build units like that recently in my market. My guess is, there is good reason people are not building them (cost to build is to high for what they can rent for until you scale up to more units) but I at lest wanted to see if anyone is doing it anywhere else around the country. 

I have no experience with building so speaking completely out of turn but it seems like you can still buy small duplexes cheaper than it cost to build.  I am currently selling a 2,400 sqft Duplex in S Omaha at ~35 $/sqft which seems hard to build at.  

@Chris Egan

You are looking at $100 per sf to build new.  I would look at going with 3 bedroom as this will be more desirable.  

@Daniel Thomas I have seen those in Buccaneer Bay I think those are technically villas however I am sure they would be happy to sell you both sides. Those are nice units but at those prices they would be hard to cashflow. 

@Josh Miller Yeah that is what I think I will find is that it is still better to find something existing instead of trying to build. For example the one I bought earlier this year It was in the $130,000 range and I know that I couldn't come close to building that for anywhere close to what I paid for it. Manly because it is all brick and on a full basement with a detached garage. Those things obviously make the cost to build go up, but yes sometimes you can still find a good existing deal with 2-4 units that will cashflow.

Here’s a duplex my wife and I acquired just over a year ago in the Los Angeles area. 

Before (downstairs):

https://www.youtube.com/watch?v=Y95SmuZaZHg

Before (upstairs)

https://www.youtube.com/watch?v=L2lwgHm8A2Q

After (upstairs & downstairs) 

https://www.youtube.com/watch?v=SIsky7tk6j4

The video only shows one unit of the duplex.. but keep in mind both units are mirror images of each other. 

Purchase Price: $475,000

Renovation costs: $80,000

Rent: $2200 each unit (2bd/1.5ba)

Some things we learned along the way:

1) Nothing is more expensive than a cheap paint job. We bought cheap paint from homedepot and it took us so many layers to get rid of the horrible blue and orange walls (see video). In our last renovation we bought Behr Marque (most expensive). Cheap paint took us 8 days to finish painting, expensive paint took us 1.5 days. Cheap paint costs us around $700, whereas expensive paint only cost us $250. 

2) If you pay for tenants water bill, make sure you install water saving devices. Low flow toilets are so worth it. We now put Niagra 0.8 gal/flush in all our bathrooms, they use half the amount of water but have great flush power. 

3) Pick materials that are easy to clean and durable. For example, in our first unit we used a laminate floor that was very textured. This allows things to collect in the grooves and made it more difficult to clean. Our second unit we bought laminate that was smoother. Cleaning and maintenance was sooo much easier for us as well as the tenant! 

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