How I Made $300K on This Lot Instead of $100K (Single Family vs Fourplex)

本站添加: 2026-05-27

[00:00:00]You shouldn't build a house, you should build a duplex. You shouldn't build a duplex, you should build a house. Both statements are true. It's not about the product that you build in general. You can't stick [music] to one. It's about understanding the right product for the right area. The biggest mistake you can make is building the wrong product for the wrong area and losing out on 20 to 50% upside, instead sometimes breaking even or losing money on your project.

[00:00:27]I've run the numbers on thousands of lots to date looking at the deals and the markets to making sure it pencils.

[00:00:32]Investors that win in this game understand the right product for the right area. When they choose the land, they let the math determine the type of product they're going to build.

[00:00:42]Everything comes down to numbers, numbers, numbers, and location, location, location. Those are two factors that will help you determine which product you should build for which area. This behind me is a single family home. It's 3,500 sq ft. What you don't know is I could have actually built a fourplex on this lot, but I decided to go for the single family home. I'm going to break down everything you need to know, and I'm going to show you the zoning code where you could end up having way more upside on a project like this or on a duplex or on a fourplex, just understanding your code and the benefits that you have as being that investor and developer. Before choosing a product on what you're going to build in the neighborhood, you have to understand the general framework. And there's variances and variables when it comes to choosing that product. First, you've got to understand the rule of 20.

[00:01:35]Two, you've got to understand the comparables in the area, what's happening and where the competition's at. The third, you want to know the rental demand. What are people paying for rent? What type of product is being rented out quickly? And lastly, understanding the depth of your buyer pool. What that means is you could build a product, but it could take you 6 to 12 months to sell. So, I understand which product sells the quickest, I'm going to go for that type of product rather than being a certain type of product because you believe in it, and then you're going to be into a project a couple years simply because it won't sell. Let's jump to the first one. Variable one is the rule of 20. What is the rule 20?

[00:02:14]Essentially, what you're doing is you're taking the values in the neighborhood of new construction homes typically sold within the last 5 years. So, let's say this home here, there are homes around this area that are selling around 1.5 million. [music] 20% of that finished value is 300,000. On the rule of 20, generally what I'm seeing is a maximum, so 20 to 25%, that's the maximum you should pay for the land. In some areas, you could be paying 10%, but this is just a general rule to understand the values of the land. So, 1.5 million, 300,000, if it's 25%, you're going to be closer to 350, plus or minus. We landed this property at 312,500, we're right in that cushion. If you'd like the entire picture of the seven-step process of what I've used to do over 200 doors today, I've dropped in a free PDF for you. Hit that link below, it's going to break down everything in a full seven-page PDF guide to help you understand the entire process start to finish.

[00:03:13]Let's get back to the video. The second variable, as I mentioned, is comparables. You really want to understand what is selling in your area.

[00:03:20]Why would I build a fourplex if everything here is selling quickly in this area, a single-family home, 3,500 square feet, five five-bedroom, three and a half bath, two to three car garages on a nice parcel of land. If that's what's selling, and I look at how quickly it goes pending and how quickly it sells, I'm going to build that. For example, behind me you see these two homes, you got one right there, and then you got one in the corner as well. That one sold for 1.2, five or six years old.

[00:03:47]The other one sold for 1.335, and then a few homes that are brand new construction are selling 1.5 to 1.7 a few streets down. I'm going to replicate what people are buying in this area versus another project like I have Fircrest. If I go 10 miles east, I have 27 townhomes. The demand in that area is townhomes. Everybody wants them. Those sell super quick. I sold all six. I had two more left as rentals and the 19 in the back are being built for an investor. That's the demand in that area. So, I'm not sticking to a certain product. I'm sticking to what product sells in what area. [music] The third variable is that rental demand. Now, you might say, "Well, you have a 3,500 square foot home. How are you going to rent this thing?"

[00:04:27]When it comes to these nicer, more luxury spec builds, this is still a spec build because I'm buying the land, building, and selling it. The rental demand here is a little bit different.

[00:04:36]When I'm looking at rental demand like the Fircrest product, I can see that for example, there's 10 rentals out there and all of them go done, rented, and occupied within 1 to 2 weeks. That shows me there is an extreme demand for rentals. Out here for example, it's all higher end, nicer homes that are a million plus. I look at how quickly is the house going pending. That house for 1.35 went pending in 3 days. That's a huge sign to me that there's a massive demand and I don't necessarily need the rental side of things, but if I needed to rent this home and let's say my payment is going to be 4,500 bucks, I have five bedrooms, I'd have to rent them out for about $900 a piece through a co-living situation or if I look at rental in the area, let's say I can rent this house out for about $5,000, I'm still covering my bases. I have enough to float through, let's say, a correction in the market and then still sell the home. For a product like this, I always want to build to sell, obviously here. Other product like duplexes, the nice and the beautiful part about it is you can rent those out.

[00:05:36]Still, I'm not going to build a fourplex in area where it where it's all $1.5 million homes because it does not make sense. Let me explain why. If I was was to build a fourplex in this area, it would be worth 400,000 a unit. Each unit's roughly 1,500 sq ft. That means I would be at 1,500, 3,000, 4,500, 6,000 sq ft. 6,000 sq ft versus a house that's 3,500. This will be worth 1.6. This house is worth 1.5.

[00:06:05]You're talking almost double the square footage to build a fourplex here with the same value. So, what does that mean for the build costs?

[00:06:12]It's going to double.

[00:06:13]In In other words, most likely I'll have like a 10% margin here if I built a fourplex. Sure, I might have good rental income, but the actual profit side of things will be 10% versus this project here I'm at over 35% on the margin because there's so much more demand for a single-family, higher end, nicer finishes. It sells much quicker, school district, etc. So, you got to keep that in mind when you're building out these projects and doing a deal like this. The other thing is I would have to sell it as one sale. So, I can't sell each unit separately. Because this is one bigger tax lot, I have to sell the whole thing for 1.6 million versus 400,000 a door.

[00:06:52]I'm not going to play that game. I play the game of selling them individually. I reduce my risk and I have much more of an advantage there. And lastly, how deep is the buyer pool in the area? If everybody here is picking up these 1.5 million-dollar homes, there will still be people that will buy that fourplex in the area because it's a nicer, hotter area. The difference is the price per square foot versus my cost basis on that project just won't be worth it. As I mentioned, 10% margin.

[00:07:21]Will a fourplex here sell for 1.6 million? Probably. It could even get 1.8 million. Even at 1.8 million, I have a smaller margin than this 3,500 sq ft home. So, why would I want to put, let's say, 200k down to make 100,000 on a fourplex when I could have put 127k down and make 300k on a single-family home?

[00:07:41]If things correct a little bit, I can make 200 grand, but I'm still putting that 127 down. I have a much higher ROI, which is protecting me on market corrections, and I have a much higher cash on cash, meaning the money that actually left my bank account has a higher rate of return. So, understanding the buyer pool, the depth, what are people looking for? How do you do that?

[00:08:01]Redfin or Zillow, look at what's for sale, and look at what's pending, how quickly it goes pending, and how quickly it sells. That shows you which for sale product people are biting, making offers, and making it go pending, and which product is selling faster. If you take this whole area, again, you will see a lot more 3,500 square foot homes.

[00:08:21]Different than the property I have east as Fircrest, you're going to see a lot more town homes pending there than the single family homes.

[00:08:28]If I built this product at Fircrest, I'd get about 1.1 a million to 1.1 million.

[00:08:34]Here, I'm at 1.5. Again, demand is everything. Understanding the depth of the buyer pool, how much they can absorb is a key to knowing the area. Now that you have the framework and the four things I look out for when I'm buying lots and building out product, now I want to separate and show you the difference between an experienced or a good developer and somebody that's a real estate investor that maybe has a builder or contractor that can build out projects for them. The first is exactly what we just talked through.

[00:09:05]The developer looks for the right deal with the right margin. The contractor with the investor or the investor with the contractor, they basically say, "Hey, I want this product type. I like single family homes, one story, three three bed, two and a half bath." Versus the developer that when I get a deal brought to me or I'm reaching out to buy a property, the first thing I do is I look what's selling, I run my numbers based on what's selling, what's my cost, and I look at my return on investment. I got a good ROI of 25%. I'm I'm for the deal. It could be a single family, it could be a one-story, a two-story, a 2,000 sq ft house, a 1,000 sq ft house, 3,500 sq ft house, doesn't matter, a duplex, triplex, a double-stack duplex.

[00:09:46]I see those in certain areas of town.

[00:09:48]I'm going to build the product that's proven, that's making money, and that has a good return. So, the investor is like, "I only want duplexes." And I've had people reach out to me, "I can't find a duplex. I keep searching." I'm like, "Yeah, because you've put yourself in a box. You want to be a real estate developer, you target building homes, you target creating a good product for your area, an area that has good demand, and you're going to be the first to sell. That's what you're doing. You're creating the product for the area, and that gives you a great wide range. Of course, if it's a a C or a D location, so if you don't know, A is the best, B is good, C is okay, and D is bad. I like to be in A and B locations. When it comes to C and D, higher crime rates, theft, all these different things, I try not to build there. I have, and it still works, but you're going to have a lot more fun in construction. People might steal your electrical wire, things like that that you have to work through. So, to summarize, a good developer picks the product for the area. They'll look at any deal as long as that deal has a good return. If a single-family is the demand, and you're like, "Hey, I'm going to do duplexes cuz that's what I like," you're missing out on 20 to 30% more profit. So, that duplex could make you 100,000, I might come in there, see the demand, build that single-family, I make 150 grand. That's a huge difference. I would have to build a third less projects than somebody that sticks to a certain product type. As I promised, I'm going to break down the zoning and the things that I look out for.

[00:11:13]Here's the thing, all over social media, when I have a single-family home, I tear it down and build an apartment complex, I get so many comments and people say, "Oh, that's not true. There's no way that that's the same house that you built an apartment on." I'm like, "Go to Google Earth, here's the address, go take a look at it. You can see there was an old house, and then I built an apartment." Okay, something to keep in mind. How in an area where it's all single family homes, could I build it a fourplex here? I chose not to because of demand, but let's say there was demand.

[00:11:39]You have to understand the zoning code has multiple sections. First, this section says it has to be a minimum a half-acre lot. Great. Well, is there a middle housing code or is there is there a affordable housing code portion within this code? Yes, there is. For example, in our county, and this is nationwide, you can reach out to your city and county, talk to them about this.

[00:12:03]There is a code that says any lot with this zoning that has X amount of square feet, let's say 10,000 square feet, allows you to build a fourplex. You have full permission. Why? Because they're trying to solve the shortage in America.

[00:12:16]We're short over 3 million homes right now, specifically affordable. So, what are cities and counties doing and state level doing? They're saying, if you have a larger lot and you can fit two, three, four units, you can go ahead and build it. Example, 10,000 square foot here can build me a fourplex. 8,000 square foot lot, I can do a triplex. 6,000 square foot lot or small or bigger, I can do a duplex. And then anything down below 4,500 square feet, I have to build a single family home. But, they allow me to add an ADU. So, it's basically a mini version of a duplex. Keep that in mind with your city and your county. It's not just infill development, it's it's coming across the entire nation in almost every city and state where they're starting to create affordable product because there is a huge demand and they want [music] people to have homes that they can move into.

[00:13:05]Typically, 1,000 to 2,000 square foot homes. If you're in this game and you're stuck with choosing the right product for the right area and moving forward with confidence, I have a mentorship program where you have my personalized cell phone number and a group chat teaching you the entire process start to finish. And we have live Zoom calls underwriting your deals, making sure you're choosing the right product, and most importantly maximizing the profit on your deal. Click that link below, book a call with my team. I'm looking forward to helping you crush it. Make sure you like, share, subscribe. I'm breaking down deals every single week dropping tons of value to make sure you're absolutely successful in your game. And as always, let's build up.