Let’s say you’re living in an old house on a lot in Vancouver. It’s fully paid off, and you’re wondering whether to renovate the existing house or tear it down and build something new. Renovating or building a new home can be very expensive, and you may not want to end up with a large mortgage at this stage in your life. But what if you build a duplex and sell one side?
Let’s look at the math.
Typically, the construction budget for a standard custom home is between $350 to $450 per square foot. Since you’ll be living in it, let’s make it a bit nicer—say, $500 per square foot. The total square footage you can build depends on your lot size and budget. Let’s assume you build 3,000 square feet in total—1,500 square feet per side. That puts your construction budget at $1.5 million.
Then, factor in soft costs like permits, design, engineering, and legal fees, which could add another $200,000. So your total cost would be around $1.7 million.
Now, depending on your location in Vancouver, new duplex units typically sell for $1,400 to $1,800 per square foot. If you take a conservative estimate of $1,400 per square foot, that puts the sale price of one side at $2.1 million.
With a total cost of $1.7 million, you sell one side for $2.1 million, pocket $400,000, and you now own a brand-new half-duplex with no mortgage. Not bad!
And if you’re in a hot neighborhood where units are going for $1,800 per square foot, that same half-duplex could sell for $2.7 million. That means you could walk away with a $1 million profit—while still living mortgage-free in a brand-new home.
But not so fast.
It’s not as easy as it looks. First, you need the upfront capital to build. Construction financing is complex, and not everyone qualifies. Even if you do qualify, lenders don’t fund 100% of the project.
At a minimum, you’ll need to have enough of your own funds to cover soft costs and about 35% of the construction costs. In this case, that’s $200,000 (soft costs) + $525,000 (35% of construction costs) = $725,000 in cash before a lender will even consider funding the rest.
And then there are risks. You need to find a good builder—and even then, things may not go as planned. You could go over budget. Worst-case scenario? You run out of money and can’t secure more financing. Then you’re forced to sell mid-project—unfinished.
Just ask the guy who owns this property:
https://dailyhive.com/vancouver/west-vancouver-home-unfinished-sale-4652-clovelly
So think twice before jumping in. But if you do decide to go ahead and need financing, feel free to give me a call.
