The case for Retrofit versus new development for lowrise multiplex projects
Most real estate investors have this completely backwards.
They see a property and immediately start planning the biggest, newest structure possible. More units equals better return on investment, right?
Wrong.
We recently worked with investors near U of T Scarborough who wanted to build a fourplex plus garden suite. Big lot, big dreams, big mistake.
Instead of their original plan, we convinced them to split their existing bungalow into four units. Two per level, working within what already existed.
The cost difference? $400,000.
The Numbers Tell the Story
Building completely new multiplex housing is a surefire way to decrease your return on investment if you aren’t careful. The math is brutal for the construction of these new multiplex projects and most investors don’t realize it until we show them our database.
We do this exercise with almost every real estate investor we talk to. The ones that see the numbers usually lean toward retrofit multiunit development over new build if they are open to listening to us. With experience doing renovations, home additions, and new home construction, we are uniquely positioned to have all of the costs for the different types of multiplex projects that are available to real estate investors, and we are telling anyone that will listen that new home builds are usually not the best idea (especially with fourplexes).
This trend isn’t isolated to Toronto. Adaptive reuse projects hit an all-time high in 2024, with over 55,300 apartments underway through repurposing existing structures.
The reason is simple: construction costs drop substantially when you work with existing structures instead of starting from scratch.
Location Drives Strategy, Not Unit Count
Here’s what most investors miss: rent doesn’t scale linearly with unit size.
Our U of T Scarborough clients didn’t need huge units to generate massive cash flow. University students pay good money for smaller, well-designed spaces.
When we reviewed market rents in their area, that sealed the deal. The existing structure could deliver four profitable units without the astronomical costs of new construction.
This location-aware approach challenges the “bigger is better” assumption that drives so many investors toward expensive mistakes.
Hidden Advantages Beyond Cost Savings
The financial benefits are obvious, but retrofit and adaptive reuse projects deliver advantages most contractors don’t factor into their analysis.
Build times are shorter, which means you can get tenants in faster. Less waste makes projects more sustainable. The permitting process moves quicker when you work within the existing building envelope.
These timeline advantages compound. Faster completion means rental income starts sooner. Simplified permits mean fewer delays and regulatory headaches that start the project faster. This leads to a shorter amount of time spent in pre-construction and construction.
Every month you save in construction translates directly to cash flow improvement.
Regulatory Environment Supports Retrofit
Toronto’s regulatory changes support this approach. The city zoning laws now allow conversion of residential properties to create up to four units, specifically to increase housing density.
Working within existing structures aligns with municipal goals while delivering superior investor returns.
This regulatory support makes retrofit projects even more attractive compared to new construction, which faces stricter oversight and longer approval processes.
The Analysis That Changes Everything
We run this cost comparison analysis for every investor because the results consistently surprise people.
Even when retrofit means fewer total units, the financial performance often beats larger new construction projects. Lower costs, faster completion, and market-appropriate unit sizes create better long-term returns.
The key is understanding your specific market and running the numbers before committing to any approach.
Most investors assume new construction maximizes value. Our database proves otherwise, project after project.
Sometimes the smartest move is working with what you already have.
About BVM COntracting
BVM Contracting is a full-service General Contractor or Home Builder located in Toronto. We provide home renovation and building services for major home renovations and custom home builds (full interior renovations, home additions, lot severances, new home construction, and laneway suites). Our goal is to help guide our clients through the process of building their home, from concept to completion.
Further than providing General Contracting and Project Management for major home renovations, we also offer value-added services such as renovation financing, renovation rebate consultations and services, building permit and design services, smart home installation services, and real estate investor services.
To learn more about our offering by visiting our services page.
