New Duplex in Ann Arbor should I build on or just rehab?

Question

Hello,

I was able to purchase a duplex in Ann Arbor that is completely value add.  It is almost a double lot down town and I was wondering, should I just fix it up or should I pay to get another building built next to it.  The duplex is a 2/1 and a bit small, 1440, so each unit is only 720.  Any suggestions would be greatly appreciated.

Thanks.

Joshua B. · Answer

You're going to need to check with the city to see if you can build. "Almost" a double lot isn't the same as a true double lot. If it is indeed a true double lot, and there's an existing duplex on it, there's a decent chance that it's zone multi-family. So, you may be able to tear down and build two duplexes. That's definitely what I'd do in your shoes, assuming you're legally able to do that.

@Sarah Lorenz has some good stories of builders downtown making an absolutely killing in these situations. What's the address?

Sarah Lorenz · Answer

@Kit Klekamp This is funny--I just went to the open house for one of the newer duplexes on the block. I saw your place--you must have just closed on it. Those up-down duplexes are pretty ugly, but I know of at least one that is all updated and getting something like $1795 for one unit. And there is one near the Stadium that is fixed up really nice--the best design I've seen. I think it is on either Hutchins or Prescott or Edgewood as you turn north off Stadium. Try to take a look at that. The washer/dryer in the kitchen is a real downside and limits the rent a bit.

You'll have to decide if you want to do a teardown or not--you probably don't want to put any money into it now, if that is the case. The demolition itself can be expensive, as well as digging a new foundation and hauling away the dirt that is excavated. That actually adds significantly to the build cost. But there could be profit there--we'd have to run the numbers. I could help you with some general numbers--most architects won't estimate costs for you. Most builders won't either! They'll want you to give them a plan and a budget and sign a contract. It takes weeks to bid out new construction. You have your comps right next door so that helps. The question is whether or not you can qualify for a construction loan to do it, and find a builder for the right price. I don't think you could use hard money for this--the numbers are too big and it would eat all your profit. And kill you if your projects runs over on time, which is common. But shoot me an email--we've done something a bit similar, so I can give you some ideas.

Kit Klekamp · Answer

@Joshua Birk, even though the property is only 60 ft wide the 4 neighbors all have side by side duplexes with the same width.  The city told me if I wanted to build I'd need to demolish the place.  I'm not sure how much demo costs nor how much it costs to build new.  I'm in the place for $310, insurance states a rebuild would be $175.  I might just fix it and pay down the principal for a year or two.  I'm owner occupying the bottom but was only hoping to do that for a year or 6 months.

The good news is I'm not over my head yet :)

I'll need to hit up an architect or two to find out how much all that will cost.  I'll have to contact Sarah since she has experience with all of this in the city.

Joshua B. · Answer

Kit - looks like it's only 60 feet wide, so you won't be able to build two houses on it. I wouldn't tear it down. Not worth it. I'd just fix it up really nice. Could probably get $1350-1500 per unit if you do it up well. Are  you going to live in one of the units?

Kit Klekamp · Answer

Hi @Joshua Birk thanks for replying.  The property address is 417 Montgomery Ave, Ann Arbor Mi 48103.

The city did say it was zoned multi-family and allowable building expansions are allowed to be 5 ft from each side from the property line and 30 ft from the front and 40 ft from the back so there is definitely room to put more/expand.

The duplex is currently a top and bottom unit so I'm also not sure if its better to make them side by side instead.

New Duplex in Ann Arbor should I build on or just rehab?

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