Laneway House vs. Multiplex: The 2026 Investment Math for Vancouver Homeowners

A client called last week with what seemed like a simple question: “Should I build a laneway house or go all-in on a multiplex?”

Three hours later, we were still talking. What appeared straightforward turned out to involve her retirement timeline, her relationship with her adult children, her tolerance for construction disruption, and her assumptions about Vancouver’s rental market over the next decade.

That conversation reminded me that the laneway-versus-multiplex decision isn’t primarily about construction costs or rental yields. It’s about matching a development strategy to your actual life circumstances and goals.

This guide lays out the comparison systematically—costs, returns, timelines, and trade-offs—then provides a framework for choosing the path that fits your situation.

The Quick Comparison

Before diving deep, here’s the high-level picture:

Factor	Laneway House	Multiplex
Typical cost	$400,000-$650,000	$2.5M-$4.5M (total project)
Can sell separately?	No (currently)	Yes
Construction timeline	8-14 months	18-30 months
Living disruption	Low-moderate	Complete (must vacate)
Ongoing ownership	You keep main house	May keep 1-2 units
Primary benefit	Rental income	Equity creation
Complexity	Moderate	High
Best for	Income while staying	Wealth transformation

These summaries mask important nuances. Let’s unpack each dimension.

Laneway Houses: The Add-Value Option

A laneway house (also called a coach house or backyard cottage) is a small detached dwelling built on your existing lot, typically accessed from the rear lane.

What You Can Build

Under Vancouver’s current regulations, laneway houses can be:

• Maximum 900-950 square feet (depending on lot size)
• Up to 1.5 storeys
• Located at the rear of your property, typically above a garage or parking space
• Occupied by tenants, family members, or left vacant

The key constraint: you cannot stratify and sell a laneway house separately from your main house. It remains part of your property, adding value to the whole but not convertible to independent ownership.

Realistic Costs

I see laneway house cost estimates ranging wildly. Here’s what projects actually cost in 2026:

Component	Range	Typical
Design and permits	$35,000-$60,000	$45,000
Construction (turnkey)	$350,000-$550,000	$420,000
Landscaping and site work	$15,000-$40,000	$25,000
Utility connections	$10,000-$25,000	$15,000
Contingency (10%)	$40,000-$65,000	$50,000
Total	$450,000-$740,000	$555,000

The per-square-foot cost—$500-$700+ for a quality build—is higher than main house construction because fixed costs (design, permits, excavation) are spread over less area.

Low-ball estimates you’ll see advertised rarely include site work, design fees, permit costs, or adequate contingency. Budget realistically.

Investment Returns

Laneway house returns come from rental income, not capital gains or sale proceeds. Here’s the math:

Rental income potential:

• 2-bedroom laneway (850 sq ft): $2,800-$3,500/month in most Vancouver neighbourhoods
• After vacancy allowance (5%): $2,660-$3,325/month effective
• Annual gross income: $31,920-$39,900

Operating costs:

• Property tax increase: $2,000-$3,500/year
• Insurance increase: $600-$1,200/year
• Maintenance reserve (5% of rent): $1,600-$2,000/year
• Utilities (if included): $1,200-$2,400/year
• Total operating costs: $5,400-$9,100/year

Net operating income: $22,820-$34,500/year

Cash-on-cash return on $555,000 investment: 4.1-6.2%

For context, a GIC currently yields roughly 4%. The laneway house returns slightly better with more effort, more risk, and the prospect of rent increases over time.

What about property value increase? Laneway houses add $200,000-$400,000 to overall property value—less than their construction cost. You’re creating rental capacity, not immediately creating equity.

Timeline and Disruption

Laneway construction typically takes:

• Design and permits: 4-8 months
• Construction: 6-10 months
• Total: 10-18 months

During construction, you remain in your main house. Disruption is real but manageable—noise, construction traffic, workers in your backyard, temporary loss of parking—but not displacement.

This is a significant advantage for homeowners who can’t or don’t want to move during construction.

The Stratification Question

City council is exploring allowing laneway house stratification—enabling separate sale of laneway units. If approved, this would fundamentally change the calculus.

A stratifiable laneway could be sold for $700,000-$900,000 in many neighbourhoods, transforming a rental income play into an equity extraction opportunity.

But stratification isn’t approved. The proposal has encountered concerns about neighbourhood character, parking impacts, and whether it aligns with housing policy goals. It may happen; it may not; timing is uncertain.

Current advice: Don’t build a laneway house based on assumed future stratification. If you’re happy with the rental income scenario, proceed. If you need the sale option, it doesn’t exist yet.

Multiplexes: The Transformation Option

Multiplex development means demolishing your existing home and building a new multi-unit building—typically 4-6 strata units under Bill 44’s R1-1 zoning.

What You Can Build

Under current Vancouver regulations, eligible lots can support:

Lot Size	Maximum Strata Units	Maximum Rental Units
3,294+ sq ft	3-4 units	4 units
4,994+ sq ft	5 units	6 units
5,995+ sq ft	6 units	8 units

Lot width matters too: 49.5+ feet of frontage unlocks maximum unit counts. Narrower lots face constraints regardless of total area.

Realistic Costs

Multiplex costs are an order of magnitude higher than laneway houses:

Component	4-Unit Project	6-Unit Project
Design and permits	$300,000-$450,000	$450,000-$620,000
Development Cost Levies	$100,000-$130,000	$145,000-$165,000
Construction	$1,800,000-$2,400,000	$2,600,000-$3,500,000
Utility connections	$35,000-$65,000	$50,000-$80,000
Carrying costs	$150,000-$250,000	$200,000-$350,000
Contingency (15%)	$350,000-$500,000	$520,000-$700,000
Total	$2,735,000-$3,795,000	$3,965,000-$5,415,000

These are total project costs. The question is how much comes from your land equity versus borrowed capital versus builder partnership.

Investment Returns

Multiplex returns come from equity creation—the difference between completed value and total costs:

Example: 6-unit project in Kitsilano

Starting position:

• Property value: $3.8 million
• Existing mortgage: $0

Development:

• Total project costs: $4.2 million (including land opportunity cost)
• Completed value: 6 units × $1.35M avg = $8.1 million

Options:

• Sell all units: $8.1M proceeds - $4.2M costs = $3.9M gain. Compared to selling undeveloped lot for ~$4.5M to developer, development gain is ~$3.4M additional.
• Keep 2 units, sell 4: Recover costs through 4 unit sales, retain 2 units worth $2.7M as equity.

The returns are substantially larger than laneway house returns—but so are the complexity, risk, and capital requirements.

Timeline and Disruption

Multiplex development requires:

• Design, permits, and pre-construction: 12-18 months
• Construction: 14-20 months
• Total: 26-38 months

During construction, you cannot live on site. Your home is demolished. You need alternative housing for 2+ years.

This disruption is the biggest practical barrier for many homeowners. If you can’t or won’t relocate for 24+ months, multiplex development doesn’t work regardless of the financial returns.

The Decision Framework

Given these differences, how do you choose? Here are the questions that determine the right path:

Question 1: What’s Your Primary Goal?

“I want rental income while keeping my home.” → Laneway house

“I want to maximize the value I extract from my property.” → Multiplex (or sell to developer)

“I want to downsize while staying in my neighbourhood.” → Multiplex (keep 1-2 units, sell rest)

“I want to provide housing for family members.” → Either could work; depends on other factors

Question 2: Can You Handle Displacement?

Multiplex development requires 2+ years of alternative housing. Consider:

• Where will you live? Rental? With family? Travel?
• Can you afford carrying costs on both properties?
• What about pets, children’s schools, routines?
• How do you feel about uncertainty (construction delays extend the timeline)?

If displacement is unworkable, laneway is your only option regardless of financial comparison.

Question 3: What’s Your Lot Size and Configuration?

Lot under 4,994 sq ft or narrower than 40 feet: Multiplex returns are compressed. Laneway might make more sense.

Lot 5,995+ sq ft and 49.5’+ wide: Maximum multiplex potential. Strong candidate for redevelopment.

Lot in between: Analyse both carefully. Neither has clear advantage.

Question 4: What’s Your Risk Tolerance?

Laneway risk: Moderate. Construction might cost more than expected; rental income might disappoint; you might not like being a landlord. But your main home is preserved. Downside is capped.

Multiplex risk: Higher. Cost overruns of $200,000-$500,000 happen. Market timing affects sale prices. Construction delays add carrying costs. Partner disputes occur. Your entire property is at stake.

If a $300,000 loss would cause severe financial hardship, multiplex development may not be appropriate for you.

Question 5: What’s Your Timeline?

Need results in 12-18 months: Laneway is achievable. Multiplex isn’t.

Can wait 24-36 months: Either works from a timeline perspective.

Want simplicity: Selling to a developer is simpler than either construction path.

Question 6: What’s Your Financial Position?

Mortgage-free, significant liquid assets ($200K+): Either option works. Multiplex may offer better returns if you meet other criteria.

Mortgage-free, limited liquidity: Laneway is more accessible—can often be financed through HELOC or construction loan without partnership.

Significant existing mortgage: Options are constrained. May need to pay down mortgage before either path is feasible, or consider selling instead.

Financial Comparison: Same Lot, Different Paths

Let me illustrate with a specific scenario: a 50’ × 120’ lot (6,000 sq ft) in Kensington-Cedar Cottage, currently worth $2.8 million with the existing house.

Path A: Build Laneway House

Investment: $560,000 total Financing: HELOC at 7.5% Interest cost (construction year): $21,000

Rental income (Year 2+):

• Gross rent: $36,000/year ($3,000/month)
• Operating costs: -$7,200/year
• HELOC interest: -$42,000/year
• Net cash flow: -$13,200/year (negative until HELOC paid down)

Property value after laneway: $3.1 million (+$300,000)

After 10 years (assuming HELOC paid off from other income, 3% annual rent increases):

• Property value: $3.6 million (assuming 1.5% annual appreciation)
• Rental income: $41,000/year net
• Total return over 10 years: $800,000 property appreciation + $180,000 cumulative net rents = $980,000 gain

Path B: Multiplex Development (Sell All Units)

Development costs: $4.1 million (including land opportunity cost) Financing: Construction loan + land equity Construction period: 24 months

Completed project value: 6 units × $1.15M = $6.9 million

Outcome after sales:

• Gross proceeds: $6,900,000
• Less development costs: -$4,100,000
• Less sales costs (5%): -$345,000
• Net proceeds: $2,455,000

Compared to selling lot to developer:

• Developer offer for undeveloped lot: $3.5 million
• Development gained: $2,455,000 - ($3,500,000 - $2,800,000) = $1,755,000 additional

Path C: Multiplex Development (Keep 2 Units)

Development costs: $4.1 million Units sold: 4 × $1.15M = $4,600,000 Less sales costs: -$230,000 Less development costs: -$4,100,000 Remaining cash: $270,000

Retained units value: 2 × $1.15M = $2,300,000 Total position: $2,570,000

Compared to keeping original home:

• Original position: $2,800,000 property value
• New position: $2,570,000 (but includes 2 brand-new units vs. aging house)

This scenario shows relatively modest gains because East Van unit values are lower. In West Side neighbourhoods, the multiplex numbers improve substantially.

The Comparison

Metric	Laneway	Multiplex (Sell)	Multiplex (Keep 2)
Out-of-pocket	~$560,000	$0 (equity-funded)	$0 (equity-funded)
Time to completion	14 months	28 months	28 months
Displacement required	No	Yes	Yes
10-year total gain	~$980,000	~$1,755,000	~$2,200,000*
Complexity	Moderate	High	High
Risk level	Moderate	High	High

*Assumes retained units appreciate and generate rental income.

In this East Van scenario, multiplex development produces higher returns but requires displacement and carries higher risk. The gap narrows or reverses for smaller lots, lower-value neighbourhoods, or homeowners who value staying in place.

Financing Comparison

Laneway House Financing

HELOC (Home Equity Line of Credit):

• Leverage existing equity in your home
• Rates: Prime + 0.5-1.5% (currently 7.0-8.0%)
• No fixed repayment schedule
• Access as needed during construction

Construction Loan:

• Purpose-built for building projects
• Rates: Higher than HELOC (8-10%)
• Requires draw schedule and inspections
• Converts to mortgage or repays at completion

Refinance:

• Replace existing mortgage with larger one
• Access difference as cash for construction
• Rates: Current mortgage rates (5.5-7.0%)
• Requires qualification at new amount

Cash:

• Simplest approach if you have $500,000+ liquid
• No interest costs
• No approval requirements
• Preserve credit capacity for other needs

Multiplex Financing

Multiplex financing is more complex:

Land equity as contribution:

• Your lot serves as your equity stake
• Valued at development potential, not just residential value
• Typically represents 20-35% of total project cost

Construction financing:

• Specialized lenders (Vancity, credit unions, private lenders)
• Requires project approval, builder vetting, pre-sales or guarantees
• Rates: 8-12% depending on project risk
• Personal guarantees typically required

Builder partnership:

• Builder provides construction capital
• You provide land
• Returns split based on negotiated formula
• Reduces your capital needs but also your returns

Presale revenue:

• Sell units before completion to fund construction
• Reduces financing needs
• Requires market confidence and buyer deposits

Most homeowner-developers use a combination: land equity + construction financing + builder partnership or presales.

Special Situations

Multigenerational Housing Goals

If your goal is housing extended family rather than financial returns, the comparison shifts:

Laneway for family:

• Build 850 sq ft unit for aging parent or adult child
• They contribute to costs or pay below-market rent
• You maintain separate households on one property
• No strata complications; informal arrangement

Multiplex for family:

• Build 6 units; distribute among family members
• Each gets independent strata ownership
• Can sell shares individually over time
• More complex legally and relationally

For pure family housing, laneway often makes more sense—simpler, faster, lower stakes.

Near-Retirement Timing

If you’re 5-10 years from retirement:

Laneway consideration: Rental income supplements retirement income. Property value increase strengthens estate. You age in place in familiar home.

Multiplex consideration: Complete development while still working (income supports carrying costs). Sell most units to fund retirement. Keep one unit as retirement home—new construction, potentially accessible design.

Timing matters. Multiplex development during retirement years means 2+ years of displacement when stability might be valued.

Estate Planning

Laneway impact: Property passes to heirs as single parcel. They inherit rental income stream and property value.

Multiplex impact: Individual units can be distributed to different heirs. Or estate sells units and distributes cash. More flexibility but also more complexity.

Discuss with estate planning attorney if inheritance considerations matter.

The Coming Change: Stratification

I mentioned that Vancouver council is exploring laneway stratification. If approved, here’s how the calculus changes:

Current laneway economics:

• Build for $560,000
• Property value increases $300,000
• Generate $25,000-$35,000/year rental income
• Cannot sell separately

Potential stratified laneway economics:

• Build for $560,000
• Stratifiable unit worth $750,000-$900,000
• Can sell immediately for ~$200,000-$350,000 gain
• Or retain for rental income with sale option preserved

Stratification transforms laneway houses from income investments into equity extraction opportunities—much closer to multiplex economics but with lower complexity and no displacement.

Should you wait for stratification?

If you’d only build a laneway in order to sell it, waiting makes sense. But stratification isn’t guaranteed, and timing is uncertain. Building now for rental income remains valid if the numbers work.

Frequently Asked Questions

Can I do both—build a laneway now and a multiplex later?

Yes, but the laneway becomes part of the demolition when you eventually build the multiplex. The investment is only preserved if you either keep the property long-term or stratification is approved before you redevelop.

What if I want to sell my property with a laneway house?

You can sell the combined property. The laneway adds value ($200,000-$400,000 typically). Developers may pay slightly less than for an undeveloped lot since they’re demolishing the laneway, but the difference is usually less than you invested—you’ll recover most of your capital.

Is there a scenario where laneway beats multiplex financially?

Yes: smaller lots where multiplex economics are compressed, or homeowners who value not moving and assign dollar value to stability. Also, if you invest laneway construction savings and earn good returns, the total wealth outcome can be comparable.

What about basement suites versus laneway houses?

Basement suite conversions cost $100,000-$200,000 and generate similar rental income to laneways. If rental income is your goal and basement conversion is feasible, it’s often the most capital-efficient option. The comparison to laneway depends on your property’s basement configuration.

How do property taxes change?

Laneway houses increase assessments modestly ($200,000-$350,000 additional assessed value = $800-$1,400/year additional taxes). Multiplexes are assessed as multiple strata units—if you keep units, you pay taxes on those units. If you sell, buyers pay taxes on their units.

Making Your Decision

The laneway-versus-multiplex choice ultimately depends on matching strategy to circumstances. Here’s the decision summary:

Build a laneway house if:

• You want rental income while staying in your home
• You can’t or don’t want to move for 2+ years
• Your lot is too small for efficient multiplex development
• You prefer moderate complexity and risk
• You’re building for family housing, not maximum returns

Develop a multiplex if:

• You want to maximize equity extraction from your property
• You can handle 2+ years of displacement
• Your lot qualifies for 5-6 units with good dimensions
• You have the financial reserves and risk tolerance
• You’re downsizing anyway and want to stay in the neighbourhood

Sell to a developer if:

• You want simplicity over maximum returns
• You don’t want construction involvement
• You need capital within 12 months
• You’re relocating and don’t need to stay local

None of these answers is universally right. They depend on your property, your finances, your timeline, and your life circumstances.

Getting Personalized Analysis

This guide provides the framework, but your decision depends on specifics: your lot’s configuration, your neighbourhood’s values, your financial position, and your personal goals.

I help Vancouver homeowners work through this analysis—running the numbers on their specific property, comparing realistic scenarios, and identifying which path actually fits their situation.

If you’re weighing laneway versus multiplex (or versus selling), let’s talk through your specific circumstances. The right answer depends on details that generic advice can’t capture.

Contact Greyden Douglas directly at (604) 218-2289 or book a call to discuss your Vancouver real estate goals.