Building a 4-plex in Portland, OR

[Nathan James]

Hi all,

I'm in the early stages of planning a development of a lot I own in SE Portland. There is a small (<600 sf) house on the lot currently, which is in pretty rough shape. I've owned the house for few years and have spent a lot of time trying to design an addition to add value to the property, but the current floor plan is really not conducive to realizing a return on that investment (tiny living room, low ceiling basement, poorly placed basement stairs, etc.). I have considered adding an ADU in the back, but since I am limited to 75% of the main house square footage, this is also probably not worth it.

     In the last couple months, the zoning has changed for my home, and the lot is now classified as RM1 (low-density multifamily), and I have learned that I can build 3+ units, and don't need to include any off street parking.  The minimum density is 3 units and there is no maximum number of units.  Instead, the code is now written that I can build as many units as I choose as long as they meet building code and the total floor area to lot area ratio is 1 to 1 (the lot is just over 6000 sf).  I'm leaning toward 2 duplexes to avoid needing sprinklers/commercial building code.

 I am a general contractor that specializes in kitchen remodels and high end custom cabinetry, but I'd like to use this project to pivot into more general contracting and property development.  I've worked in most phases of residential construction, but have not yet managed  a project this large.  

I guess this is an introduction of sorts, and a request for any help with the following questions.:

1)  I've spent some time lurking here on BP and using the calculators to analyze potential options.  Are there any resources available and recommended that would be better suited for creating a pro forma for new (spec) construction?

2) Does anyone have a general idea of what soft costs I could plan for if I sell the units as condos?

3) The lot is mid-block with only 50' of street-frontage.  Does anyone have thoughts on the value of adding parking?  I'm within a couple blocks of a max stop, and a block from a bus stop, so I am not required to include it (I don't think).  The new code requires a 30' x 30' courtyard or rear setback that is 25% the depth of the lot.  This makes including parking somewhat onerous.  I'm trying to weigh the value of including parking for all units vs. just parking for some (potentially larger) units, and perhaps even fitting an additional unit.  The property is in the Jade District if anyone has particular insight on the area.

4) I have some contacts for real estate agents, but I feel like they're better suited to assisting buying and selling SFR. I'd like to find an agent that has experience in selling smaller multifamily properties. How might I find someone to help with this?

I could go on and on, but basically I would love to get any insight into how I should approach this opportunity.  I'm not sure at this point if I'd like to sell the entire property as a whole when I'm finished, or sell each unit as a condo,or even keep the most or all units to rent. 

I have been blown away by the openness and general mutual helpfulness of this forum.  I appreciate any advice or insight on any of these questions, or any general advice you'd like to impart.

Thanks for your time,

Nathan James

[Mathew Wray]

Morning Nathan,

Congrats on exploring a big jump-it takes courage to buck the news cycle and confidently reach for a bigger future!

I have answers to a few of your questions while I’m sure spec builders here can chime in on their end for you. 

While Portland may not require parking, I would strongly consider it if you’re thinking you’ll sell them individually as condos, especially in the Jade District. Yes, you’ll have good transit access along 82nd but I believe you aren’t as likely to attract the car-less owner there as you would closer in. 82nd is changing, but I don’t think it’s happening fast enough to justify leave out permanent parking if you’re reselling individually. You’d be more likely to get away without parking for tenants but even then, what kind of tenant are you going to attract? If your target tenant is looking for a car-less lifestyle then you’re going to be competing with units close-in so you’ll have to win on price or features to get them out to 82nd. All that being said, it might not be worth the cost of putting in parking, just be aware on the front end that you’re reducing your end buyer/rental pool by not having it. 

Have you comped our what four condos will sell for vs. two duplexes? While you don’t have to decide this instant (you could always convert later) it’s good to have an idea of the market differences between mf and condos. 

As for soft costs, you're looking at a fair amount for a condo conversion-there are legal docs to have drawn up, reviews, surveys, recordings, setting up the HOA, reserve studies etc. There are attorneys who will help navigate the process for you and act as an orchestra conductor to keep things moving along. I've got a lender who is a problem solver and loves geeking out on the minute details of these problems (it's what makes her a great lender) and she could be a great resource for you...she's put together condo conversion workshops with experts all talking about their components. I'm happy to make an e-intro.
 

The 80/20 rule applies to most things in life but in Portland real estate it’s more like the 90/10 rule...10% of the agents do 90% of the work. The best way to find an agent with the skill sets you’re looking for is to ask for referrals from people you trust or on places like BP. There are a handful of active agents here on BP in the Portland area (including my business partner and I) who would be good places to start. I suggest creating a list of questions that are important to you and start asking!

You said you’re not sure yet what route you’re going to take and I applaud you for doing the investigative work now, before you break ground! One last thought, have you considered just selling to (or trying to partner with) a developer? You’ll make less money but you may learn more along the way for future projects or reduce the headache factor (which can be significant). Not saying you shouldn’t move forward, just that all options should be on the table! 
 
Mathew