Building new worth it? Duplex alternatives if too expensive?

Question

I'm in the DC area, where multi-family units/duplexes/etc are basically non-existent, or command insane prices.

If you were going to consider building instead, here are some questions:

1. Would it be silly to consider new construction at this time in 2020 given current material costs?

2. Other than a duplex style, what type of small-ish build outs would be affordable but also be most convenient for house hacking or renting out to a tentant without interacting with them as much? For example, basements with separate walk-in entrances, etc. Are there any builder websites that might show a # of different property builds that might be optimized for something like owner occupied or tiny multi-family/duplex?

Teri Feeney Styers · Answer

@Neil Quinn I don't see any price rollbacks happening on materials anytime soon - natural disasters just have a way of increasing them due to demand. I have done several new construction second units. Recently I built two tiny houses as a multi-family project. Some of my stuff has been less than 200 sq feet and still met code. Basements in older homes can be problematic - ceiling heights, fire separation, access to sewer above grade etc. But add-ons can be a great investment.

David Fernandez · Answer

I will send you some numbers, but the idea is to find a property with an existing space that can be easily converted into an ADU, not a property where you need to build anything new. Properties with walkout basements, second entrances etc. can be easily separated into main home and ADU by drywalling an entryway or installing a door that connects them (usually top or bottom of the stairs like Kelly said). If you find the right property, you can spend as little as $5-10k to add a nice kitchen.

James G. · Answer

@David Fernandez,  if Neil wants to move out after 1-2 years of living in this newly converted ADU, can he still rent it out?  I've heard that for the most part ADU's are only for owner-occupied properties.

Neil Quinn · Answer

Makes sense - just minimal construction to add doors/windows/stairs and some plumbing.

Kelly Skeval · Answer

@Neil Quinn I've converted basements to make duplexes (this was my first house hack; a raised ranch with a basement apartment) and I've also built a new duplex. My new construction is a cash cow but I didn't build at a time when the cost to build was so high.  My understanding is that we're not going to see the cost of materials come down. I have a few new construction clients right now who are flabbergasted by the quotes they're getting back.

When I did build new, I did a ranch style with a walk out basement as it was the most cost effective way for us.

I love raised ranches for converting into duplexes.  The windows are usually already there and up to code along with a walk out, making it easy to convert. We just wall off the stairs connecting the two levels. Not sure if this style of home is available where you're looking as I'm located in central NY, second I would consider ranch homes with basements with walk outs and windows.

Neil Quinn · Answer

Thanks David.  This seems appealing too, but I fear the initial outlay of an Arlington property + ADU would be damn expensive. Feel free to message me any numbers that you think might be reasonable or that you've seen.

For example, any idea what a small 500 sqft or so ADU would cost to build?

David Fernandez · Answer

Hi @Neil Quinn, a cheaper alternative will be to buy a house in Arlington County and build an ADU within it. Arlington county has relaxed its standards for accessory dwelling units (https://housing.arlingtonva.us/plans-reports/accessory-dwelling-ordinance-update/). Fairfax County is proposing changes to the current ordinance, but nothing has been approved yet (https://www.fairfaxcounty.gov/publicaffairs/county-proposes-changes-accessory-dwelling-units-and-home-based-businesses-better-serve-residents).

If you can find a home where you can create a smaller, independent space with its own living, bathroom, and kitchen space, you can rent it as an apartment. Target homes with walkout basements or separate entrances, most of them will already have all you need there, except for the kitchen. If the layout allows, you can easily build a kitchen taking advantage of the existing bathroom pipes/drains.

Adrienne Green · Answer

Hi @Neil Quinn! In terms of new construction that would meet your needs, I think the closest thing you'll find in NOVA would be a place where you could do a basement rental. You may or may not see the option to add a wet bar that could function as a kitchenette, and you can always ask the builder about adding that in, along with a door at the top of the basement stairs.

The numbers wouldn't look great on new construction in this area, but you must consider that your maintenance/repair budget would be pretty low for 15 years: no HVAC replacement, roof, etc. Plus new construction will be to today's design trends, so you should rent quickly and be on the high end of market rent.

Neil Quinn · Answer

I'm flexible, but was mostly focusing on northern virginia, because quite honestly, landlording in DC sounds terrifying to me.

Trying to stay as close to DC as possible without spending a fortune since I want to live in it for a while and am still single.

Leo Watts · Answer

@Neil Quinn

What part of town are you targeting?

Adding extra bedrooms in a basement plus converting a garage gives you an up to code triplex so to speak.