Mixed use or town houses on a 0.4 acre site in a fast growing commuter town?

Question

First post here! We have this great plot of land which borders main street and another street on which we’re rehabbing a couple of homes. The town and area has great economic draw for new people. On our main street site we got this very beat up 1860’s home which would be a money pit to be rehabbed; c'est la vie- (that’s French for its getting demolished).

This little town is a satellite/commuter town for a larger town. My instincts say go for mixed use with a couple of stores on the bottom and apartments above. However, I am just not sure that even though it’s the top school district in the state, that this Main Street will gentrify quickly enough.

We LOVE the idea of Pre Fab, as it’s potentially fast and predictable. But it might be that four, five or six three story town homes make better sense.

Any BP’ers have experience with this type of situation?

If we go town houses, can we pour a large slab and add the pre fab homes in a modular way to recycle the cash?

All and any replies greatly appreciated.

Thanks

Robert Ellis · Answer

I think mixed use is great. If you have good value in the land I'd start with zoning and banks first. Local banks can give a lot of good value. If it's that good of a plot sell it to a bank but if you want to develop I'd do a mixed use and keep it and entitle the site if the land is free and clear just get the plans and designs together.

Chris Seveney · Answer

@James W.You should hire a consultant to perform a market study to outline what would be the best fit for the land. They will also give you information on potential rent rates etc as wellFrom there you can compare costs to build and see which path makes the most financial sense

Bryant Brislin · Answer

Every submarket/micromarket is so unique, it's hard to know what your's can support when it comes to retail, and what it would be like to deal with those types of tenants, especially small business owners who may operate on a razor thin margin, like most food/coffee businesses do. In general, from a business standpoint, the townhomes would be easier probably, but if you just have a passion for the idea of keeping the streetfront activated with a couple of shops, and it makes you happy without putting you in the hole, then do it.

James W. · Answer

Great idea thanks agan!

James W. · Answer

Hi @Chris Seveney as I am the lender in this out of state partnership I will certainly be hiring a consultant to consider land use. We'll also be hiring an architect to see what our options are and relations with the town are honest and cordial. I truly appreciate your reply thank you.

James W. · Answer

Hi Liam the local school is full (but at the other end of the Main Street). The larger town this is a satellite for is bursting at the seams. The new schools there have Portokabins for the new pupils and the new wing of the local hospital already needs extending. I do hope Prefab can be achieved with Town Houses. This is certainly what the town wants to achieve. Thanks for your reply.

James W. · Answer

Hi @Robert thats a very thought provoking response- thank you. We are in dialogue with a specialist prefabriated/modular company who might build a single family home on a different part of our site. That would be a simpler task. However we would get into a lot of detail about that other SFH as the design is part of the permitting process. I had thought that fab/modular was 10-20% cheaper. Your experience in this area cannot be ignored, and certainly makes me more strongly consider the townhome route. I will certainly get into this much much deeper. This wont be our last site in this town. Thanks!

Robert Ellis · Answer

99% of residential multifamily and single family is not built prefab. Panelized construction is newer and trusses have been around forever. But you aren't going to design and prefabricate a structure and assemble it with cranes I can tell you with 100% certainty. Stick built is the cheapest way and having framers frame it is the cheapest. Townhomes are extremely low density. Even the narrowest without garages might be 12 units per acre. mixed use is complex and you need a commercial agent. that's a small plot for mixed use. if you don't have a lot of experience I'd recommend talking to the city first about permitted uses within your zoning and what they may allow variances on for development, check your height restrictions first. Go get your zoning info first there isn't enough info here.

James W. · Answer

Dear Bryant excellent response thank you. The thinking was with the stores was to have some recurring revenue rental for these commercial units. However your point about razor thin margins is a good one. Also re-zoning will be complex, but possible. This is a very special (for me out of state town), so we will be doing more flips in there, and if we build townhouses we can mix the model and sell some and rent some too. Thanks a lot!