Become your own Multiplex Developer?
Duplexes, triplexes, fourplexes and more – Homeseekers looking for something other than a condo are increasingly seeking these out. And if you’re the owner of a single-family home, that makes it a prime time to build one on your property. To help you understand everything that entails, this guide to becoming your own multiplex developer will cover the basics you need to know.
What is a multiplex?
A multiplex home is a residential building situated on one lot with multiple units contained in the structure(s) on the site. That could be two homes sharing a wall, which form a duplex, three units grouped together, which is a triplex and so on. Multiplexes could also consist of multiple buildings on one lot, such as two duplexes grouped together sharing a common garden area.
It can be difficult to estimate how long a city or municipality will take to hand you approvals, but you can consult their resources for more information.
Why build a multiplex on your single-family lot?
If you currently own a single-family home, a confluence of factors have made redeveloping your lot into a multiplex a good idea. That’s especially true if you’re looking to downsize, but remain close to family.
Namely, BC has passed Bill 44, which mandates that almost all former single-family-only lots must now allow multiplexes. Furthermore, as we have seen, the new condo market is currently flooded with units that aren’t selling. That means both developers and Homeseekers are pivoting to smaller-scale new homes projects, and multiplexes are ideally situated to absorb this demand.
“We continue to build up this network of people who truly believe that multiplexes for generational living are one of the important products that we need to build well,” says Louis Nguyen, Director of Sales at Costar Construction Inc. “And in our developments, we focus extensively… on multi-generational living options.”
Rather than selling off their property and moving away, many owners of single-family homes find that they can give their children or grandchildren housing options while securing their own future.
Two options to build your own multiplex.
There are two options when it comes to turning your single-family home into a multiplex. You can either do it yourself and, essentially, become a developer, or sell your home to a development company and reserve a unit in the completed multiplex.
“Multiplexing is really unique because it’s made every realtor into a commercial broker, and it’s given anyone who has a ton of equity in their home an opportunity to become a developer,” says Sanj Aggarwal, owner of Icon Projects Ltd.
If you want complete control over the process, then becoming a developer yourself might be the way to go. But be aware this option has many potential risks and pitfalls. Nguyen explains that this approach is more fraught because you’ll take on the risks of financing and borrowing money from a lender, finding the right builders and more. He also says that any on-site hazards, such as contaminated soil or an oil tank in the ground all become risks you have to assume as well.
For these reasons, both Aggarwal and Nguyen recommend working with a professional property developer to construct a multiplex on your lot. The way it works is that you sell the land to the developer and sign a contract that guarantees you a unit in the finished building. As we’ll discuss shortly, the contract also covers how involved you want to be in the construction process.
Just how much is your multiplex site worth?
Many Homeseekers are excited at the prospect of building a multiplex on their former single-family home lot because they assume that, for example, if they can build four units then their land must be worth four times as much. But it’s not that simple.
Determining the value of your lot requires looking at comparable properties, estimating what could be built there and more. That’s why Aggarwal says, “I think a great place to start would be to contact your local realtor.”
Nguyen agrees, stating, “talk to the realtors who have been trained extensively on multiplexes. Try to understand the economics of the valuations of your land… from the developer’s perspective.” Knowing approximately what you can expect a developer to pay for your lot will make your budgeting easier.
Choosing a multiplex developer.
There are many multiplex developers out there, and more are popping up as the market takes off. To help select the right developer, there are a few steps you should take. First, look at their website to see if they have a portfolio of past successful projects. That could include not just multiplexes, but single-family homes, laneway homes and even small apartment buildings.
But beyond their website, a good developer should also let you visit projects under construction to see their workmanship. “If there’s a builder or developer that is willing to take the public into a construction project midway through… that is usually a good indication that their system and their values are more transparent,” says Nguyen.
You may be used to pre-sale condos, where you can visit showrooms and sample units, but that is a bit trickier for multiplexes. Since they are constructed on smaller scales and on-demand, there may not be any pre-construction mockups to see. Instead, you could be presented with sample materials and blueprints. “In multiplexing, we just have to get a little creative with how we show and present our units,” says Aggarwal. “So, we are relying very heavily on virtual walkthroughs. We are also designating days for site walkthroughs.”
After selecting the right multiplex developer, it’s time to consider how involved you want to be in the design and construction process.
Limited versus general partnerships.
If you’re just looking to sell off your lot and not live in the completed multiplex, then you won’t have to be involved in the construction process at all. But if you’re looking to live in the finished development, you’ll likely want to exercise some control over the end product. There are two options available for homeowners looking to redevelop their single-family home into a multiplex when working with a developer: limited and general partnerships.
Limited partnership.
For many homeowners, a limited partnership is likely what you’re looking for. As the name implies, your involvement in the process is more limited. Aggarwal states that limited partnerships involve a, “contract, which stipulates which decisions the limited partners would like to weigh in on. And that could involve, you know, fit and finish, it can involve colour selections, or it can involve… major decisions, like borrowing or sale price and stuff like that. So… these types of structures are really flexible depending on the circumstances.”
Depending on the contract you negotiate, a limited partnership with the developer that buys your property to construct a multiplex lets you weigh in where you want, but leave the actual construction to the professionals. This is also your chance to specify what you want the final units to look and feel like. For Homeseekers looking to live in the completed multiplex, it helps to nail down the specifics early.
Even sitting down and envisioning what you want can help. As Nguyen states, get started as soon as you can, because, “before they start the process of talking with the architect or the designer, it would help the process to go through a lot faster and also they’ll have a lot more control.”
If you’re looking to house family members with you in the final multiplex, when forming a limited partnership, it’s best to have them onboard as early as possible, too. You want to determine everyone’s ownership stakes and level of input as well. That way, you’ll have everything in writing. So, start making those calls as soon as you can.
General partnership.
If you want the utmost control over the way your new multiplex will get built, you can enter into a general partnership with your developer. However, the major caveat with this approach is the fact that you’ll be taking on much greater risk.
“On the finance end, the general partners have to qualify for that financing, not necessarily the limited partners,” says Aggarwal. And beyond the money, general partners in a multiplex construction project assume other risks, too. “Yeah, and not only liable for financing, but liable for all project costs. So as a limited partner, your risk is limited to your investment. As a general partner, you have complete risk exposure,” continues Aggarwal. As mentioned earlier, these risks could include on-site hazards, delays and other issues.
As a result, most Homeseekers looking to convert their single-family home into a multiplex will likely prefer a limited partnership. However, if you are willing to take on the aforementioned risks, have a lot of experience in construction and development and want a more hands-on experience, then a general partnership may be right for you.
Just bear in mind that while you can go as wild as you want with interior layouts, take some time to consider who will be buying the multiplex after you. If you plan on living there longterm after it’s finished, then this is not as much of a concern. But if you want to sell units to other end users than yourself, more standardized layouts may be preferred. As Aggarwal says, “not everybody wants a bathtub in their living room, right?”
How financing a multiplex development works.
Building a multiplex will likely require financing beyond the sale price of your single-family home to a developer. This chunk of cash will help, but to fill in the gaps, you have a few options. As mentioned above, in a limited partnership, the developer takes on much of the financial risk, so you can work with them to determine next steps. At the same time, Vancity now offers financing for multiplex construction.
For Homeseekers looking to build a multi-generational multiplex, this will require conversations about money. You’ll need to determine how much others are willing to contribute and who’ll be signing loans together with you. Aggarwal says that, “essentially, you are able to sell shares within that development. And the number of shares you have will have a direct correlation to your investment and the total project cost.”
Once you determine who’s on board and how involved they want to be, get in touch with a mortgage broker. Hammer out the details early and save yourself headaches later.
How long will building a multiplex take?
A multiplex construction project involves many moving parts, and one of the first steps a developer must do is start working with your municipality to get permits and approvals. “I think the first step that you can take is email the city and just ask about what we can do on this property,” says Nguyen.
Once you’re clear what can be built on your lot and you’ve signed on with a developer, the timeline can begin. But that does not mean it’s time to move out immediately. Aggarwal says that, “So day one, once the agreement is done, we would start working on the architectural layout, site plans, stuff like that. All while you’re living in your house – we can get really up to that building permit stage and you can be in your home. And once we have an idea of when your permits are being issued, maybe 30 days later when the permit is issued, you move out to your temporary location.”
It can be difficult to estimate how long a city or municipality will take to hand you approvals, but you can consult their resources for more information. For example, the City of Vancouver has a one-stop online portal where you can get all your documents in order.
After you move to a temporary location once your municipality has handed over permits and approvals, you can anticipate about a year to 18 months before your new multiplex is move-in ready. Of course, that timeline may vary depending on the specifics. Unlike condos, multiplexes are much more tailored to their sites and unique in their layouts, so it’s a bit harder to make blanket judgements.
What to know about moving into your new multiplex.
Going with the limited partnership route, you’re essentially buying a pre-sale unit in the finished multiplex. As the completion date approaches, there are some things to know about moving into your new multiplex – especially if you’re settling down with family members in a multi-generational living arrangement.
Namely, your new multiplex is basically a strata. “In our case, we actually hire and engage with a property management company before the first homeowners move into the property,” says Nguyen. “So the professional property management company will already have been contracted in place. They will manage all of the first steps, in terms of, you know, starting to take over – making sure there’s insurance on the building, making sure they have… like a property manager.”
Like any strata, you and your neighbours will have to share maintenance of the common areas, roof, garden and other shared amenities. How you want to do this is up to you, but both Aggarwal and Nguyen highly recommend that all residents pitch in via monthly strata fees, just like in a condo building. “I feel like if stratification and strata management are done right, it would relieve a lot of the headache and a lot of the conflicts between homeowners who are living on the same property together,” says Nguyen.
If you’re sharing your new multiplex with other generations of your family, think of your strata fee as a collective commitment to each other and your home. You will be sharing common areas, and pitching in a small amount monthly from everyone will help ensure fights later – such as who will replace the roof or repair the siding – are avoided.
Building your own multiplex on a former single-family lot requires coordinating lots of moving parts, but especially for families looking to house many generations together, they’re often worth it. The benefits are multifold. Not only will you get to return to your familiar neighbourhood upon its completion, but you’ll be close to children and grandchildren, sharing in childcare and other activities. Multiplexes “are going to give you that neighbourhood feel,” says Aggarwal. “And, you know, it’s going to bring families back into neighbourhoods that they have been priced out of.”
