Q&A on Denver Duplex Development


Recently we had a new client send us a list of questions regarding our expertise on duplex developments in Denver. I thought these we’re some great questions and worth sharing.

1. What is the target (largest) demographic for speculative new builds (duplex) in the Highlands/lohi neighborhood?
Most of the buyers that we’ re seeing are older millennials, usually two working professional incomes, 0 to 1 child, we’ve seen jobs such as software developers, pilots, sales professionals, etc.

2. What is the “sweet spot” number of bedrooms/bathrooms that are expected for this demographic?
Somewhere around a 4 bed 3 bath. We typically see an office on the first floor with a powder, a guest bedroom in the basement with a bath, and either a dual master or a master and 2 beds on the second with a Jack and Jill.

3. What are the other “must have” features of this target group, i.e. 2 car garage, roof top deck, outdoor space, etc?
All of those listed. The kitchen package should at least be stainless steel we typically use KitchenAid package up to a Viking for premium sales, we’ve also done steam showers, and dual head showers are becoming popular, master closet must be roomy, house should be pre wired, energy efficient furnace and hot water.

4. Are there any building certifications that command a premium, such as Energy Star, LEED, etc?
We have done energy star on some homes, its good branding and as the market tightens up it may give a competitive edge on sales but the added expense is probably a wash with the added cost. Our goal isto implement green practices where it make since in all of our projects.

5. Is there a market preference for a duplex vs. a detached tandem house?
Zeke mentioned this choice came down to maximizing the square-footage. Are there other factors to consider? The primary issue with a tandem house form is that on an inner lot one of the units loses the third floor because the bulk plane steps down from 30 feet to 24 feet in the rear.

The garage situation also gets screwy with the unit in the front and often times they end up as an attached garage in the front and rear which mean you do not get the detached garage credit for your FAR. I.e less square footage to sell.

If there is a house on the lot that is worth saving or if you’re a home owner that want’s to live in one house while building a second house the Tandem House form may make since. Even so I would do a Feasibility study to make sure this building form is feasible within the zoning rules (even if the zoning form is allowed).

6. Is there a demand for, or is it a selling feature to have an accessory dwelling unit? In other words if you can afford to build one, do you typically see that value back in a sale?
For a single family I think there is definitely a market and good ROI given the extra income potential. With a new duplex it may be hard to obtain the extra sales value if you’re already at the top of the market with your project for a duplex in the area. We’ve also been rejected by the city for trying to do 2-ADUs along with a new duplex project, the zoning administrator was not clear but it may be possible to get by with one ADU on the property but then it would need to fall completely to one side of the parcel line.

7. At what stage of design/construction do you (real estate agent) ideally become involve in a residential development project?
We like to be involved at the beginning of design meetings to add buyer input into the design process, we can also get your team into preview competitive products coming on the market and look at comparable sales. We like to list the project around frame completion and can help with buyer upgrades during pre sales.

8. hat are typical agent fees for involvement in a development project. Is it the standard (3%) fee for the sale of the house, or are there additional fees?
There’s a lot of variation in the market but typically we see 3.2% toward the listing 2.8% towards the buyer agent. When working with both Zeke and Amy on sales, we include a development consultation with Zeke (for these types of question, zoning and plan review). A custom pre-sale website, professional photography, open house, large project signage, flyers, listing on all major MLS and real estate web search, pre-construction consultation. We can also coordinate staging for an additional fee.

9. Where is the Highlands neighborhood market in terms of timing, compared to the rest of Denver. Is it slowing, peaking, past peak?
Here’s my opinion, given I do not have a crystal ball. The market after experiencing explosive growth in the last two years has slowed slightly, heading into winter and election year. We have not really seen any price drops though and days on market are still hanging around 30. Many of the developers we work with consider highlands a “blue chip” area and even if we do hit a slow down or even another recession blue chip areas tend to retain value longer and be hit much less severe. I would think current comps would be a safe bet but would not account for further appreciation in your pro-forma.

10. What other Denver neighborhoods are undergoing, or are about to undergo the type of transformation and re-building that the highlands/lo-hi area?
Sloans Lake, Berkley and recently Sunnyside have seen similar levels of redevelopment.

11. Do you have any recommendations for survey companies for obtaining Improvement Survey Plat (ISP)?
We typically use Gillian’s, talk with Amy Bacher 303-668-7148. Let her know you are working with the Root team and will need a need a new construction development survey and a parcel reconfiguration.

12. Given your extensive experience and expertise with developing duplexes in NW Denver, what is the biggest piece of advice you would give someone about to start their first project?
Work with an experienced Architect, GC or Development Group on your first project that you feel comfortable with and that can help you shortcut a lot of potential mistakes in Denver residential development.

Make sure you’ve got a quality superintendent and be willing to negotiate and bid all subcontractors to stay on budget. Make sure you’ve got contingency built into your budget. I’d say this whether it was our team or someone else’s, the first deal is the toughest and it’s worth paying a little extra or giving up a little more of the pie to have an experienced team to help put the deal together.

Typically when working with new client our first step is to do a marketing feasibility study. During this feasibility study we typically walk comparable projects on the market, summarize key marketing-trends as discussed above in further detail, pull comparable sales, outline zoning restrictions, layout a site massing, pull in sample plans, and help with a preliminary pro-forma.

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