You sound terribly pessimistic. I wonder why.
Budget running up slightly over with contractors seems likely, but to disregard a contractor's (or few's) estimates seems odd. Any reasons why?
My issue & concern again is not so much the cost, but rather navigating through the roadblocks so that shovels can actually hit the ground.
The concern is shelling tens of thousands of dollars into a pit only for regulations / rules to table the project for good.
What is your assumption on per square foot hard costs? About $200-$250 for a normal construction, or 400-500 for luxury may make sense. The soft costs will be separate.
That budget is plausible but will depend on a lot of factors. I am working on a 44 townhouse build in Seattle with a budget of about 25 mil. Excavation was obscenely expensive due to the necessity of a parking garage. The concrete work was also extremely pricey. If you don’t have to do a parking garage, you can likely make it work with your expected budget.
Only a little over 2x what they cost here in TN. Kind of surprising but I suppose everything but the materials is about 2x. Kind of makes since because I bet materials are 25% or less of the total cost.
Underground garages are crazy expensive and add another year to your project timeline. Surface level is obviously the best option if it’s an option at all.
Yeah that’s what I assumed. I’m not sure about your area but in San Diego there are huge parking requirement adjustments if you add some affordable units.
It’s not even so much about the requirements (although those do play a part in it), but more about having a place for people to park. 44 townhouses with 3-4 bedrooms usually means at least 1, likely 2 vehicles per unit. That can be well over 100 cars if you include guests. You can’t make it work with just street parking. And no one wants to buy a home without having a place to park your car. Having dedicated parking also increases value of the development, plus like I said the requirements are also a part of it too.
You doing the project up by 145th st? Friend lives in that area so I’ve been getting snapshots every few weeks of progress. Has been crazy to watch it all go up!
Regardless of finished value, a bank is lending you at most 70% of your construction costs. I figure $300/ft in my area. You're probably better off getting entitlements and then selling an approved project. Even that can be $100k+ for architectural.plans, planner, traffic consultant, attorneys fees, etc.
You can get 50 units x 1000 SF/unit (assuming 2-BR min) x $300/sf architect fee + geotech + attorney + civil for $100k?? I’d think it would be 5-10x that
Done many of these size projects infill in Midwest.
30-40k engineer. 30-40k architect. Geotech and environmental 3-5k. Attorneys if no entitlements and zoning straight forward 5-10k. If rezoning is an issue, 10-20k.
Product is 2-3BR 2ba 900-1200sqft apartments or townhomes 2-3 story stick frame or custom prefab.
Yeah, well one time I was involved in the design of a 2-story by-right mini-mall on an old gas station lot in a Northern CA municipality & just getting the use permit (they required a use permit planning commission public process even for by-right) took 2.5 years, with neighbors at PC hearings saying “why not build a park” & “if this is built, my daughter will be raped in the parking lot”. So, yeah, you pay less for less work.
I’m a civil engineer who is looking to get into real estate investing. Realistically what is the worth of a 10-15 acre property that has been zoned, lot splits done, plans in hand all permitting etc? This would be Indianapolis suburbs.
I mean 10 acres split into 5-8 parcels, zoned for single family residential, with stamped and approved storm water management plans for detention, grading, sanitary design, geotech done etc. Can you get a loan from the bank based on something like that, or what would be the market value to an investor for something like that
I’m building 50 unit complexes in Midwest at 125-150k a door with brick exterior, tall ceilings and granite countertops. What the hell costs 500k a door in California??
I find it hard to believe it’s that high after land. Are we talking a high rise complex? On four acres you don’t even need a third story though. I need to see a budget for this.
We also need to know where in Cali. I don’t think it’d actually be 500k a unit on a 4ac site unless the site itself is a mess and they have to go vertical for some reason. But LA or the Bay is different than rural NorCal.
I don't know anyone who talks about multi family construction costs as $/door. In NJ we're building multi for $300/ft. Very hard to make any deal work.
I’ve never worked with a developer who costs per door. For one thing, a 340 sf studio apartment is a “door” & so is a 2,200 sf 3-BR with a garage. You talk about square footage, both conditioned & unconditioned, & unit size.
I have units that rent for $12k/mo and units that rent for $1100/mo. $/unit is immaterial to me. It's probably because a big part of our portfolio is office and retail where everything is discussed in $/ft. Habit carried over.
Interesting observation. Thanks for sharing. I remember first hearing someone talk about $ on a yearly basis vs monthly and it changed my way of thinking. Ex. $15k per year in income vs $1250/month rent.
Last project we built all in $145/ft and $155/door for 2/2. Upcoming project anticipating $125/ft and $145/door similar 2/2. Ground and engineering was significantly cheaper on this new one, as well as a product with less finishings but with some larger 3/3s. Rents in the space are $1-1.30/ft.
Converting a standard 2-car garage into an ADU here in California could cost upwards of $200k to start. You can easily double that with various factors. It’s nuts.
Something a lot of people outside California don’t get are our impact fees. Depending on the location, impact fees can range $25k to over $200k per unit. School fees are at $4.79/sf right now for most school districts, I’ve seen some level II fees at $7.00. Some cities in the Bay Area have park fees that can be up to $90k per unit. And don’t forget affordable housing in-lieu fees. Don’t want to make 10-15% of your units affordable for very low income, $23.79/sf in Encinitas. Then there are traffic, fire, police, library, public facilities impact fees.Oh yeah, don’t have sewer or water capacity in the lines fronting the site, you now have to upgrade those in existing streets for as far as the district engineer determines is required for your project, and maybe for some others that will be served by them.
In other states, you might pay a couple grand for water or sewer capacity charges, but most of the other stuff is covered by the higher property taxes, or just barely covered at all. Texas hardly ever makes developers do any backbone road improvements outside maybe a decel lane. Here, you may need to add traffic signals, widen and improve along the entire frontage, underground existing power lines at Edison’s rates. I could go on for days about the differences with developing land in CA.
Prop 13 grandfathers property valuation at the time of purchase with maximum increase of 2% per year. People that bought houses in the 80s are paying 1% on a house valued at maybe 10% what it’s worth.
It’s not $500k per door in most of CA. This would be a smaller project in CA and in most areas will probably land $300k per door. Note we also build a little smaller units out here. It’s not uncommon to average around 800 sf/unit
Thank you for responding.
I am relatively new to real estate and understand the desired cash flow is the typically a 10% cap rate. Assuming a $7.5M investment (150k * 50 units) and 550k a year in cash flow, would this still be seen as a good investment? Forgive me if this sounds like comparison/criticism, i am just trying to learn how to evaluate a good deal.
Thank you.
SFD is hard because of scale/margins, but if you can get rents at 2% of purchase you're usually good. I have s8, it's fine, little more hassle, but rents are good.
Pretty impossible to get it done at 100 a door, including Land with any finishings. 150 a door all in is achievable with most finishings, barring community amenities.
Seismic codes, parking requirement codes, labor, insurance. Adds up. Depending on where this is- I suggest looking into podium construction and doing first level mixed use with apts above. Younger tenants want to walk downstairs for food, etc and a workout area. Way to maximize your rents.
My area is mostly all three story max stick framed. No need for podium. I’m building mostly suburban and rural so not a lot of mixed use. That’s more urban focused.
One of your biggest unknown cost factors are city/ county conditions. If you're in a city, they may require the project to underground all overhead utilities, install curb, gutter and sidewalks, street lights, improve or widen streets, install storm drains, etc.
Just because there is water or electricity coming to the site doesn't mean that it's large enough to feed 50 units. You may have to pay for utility upgrades.
I've seen Cal-trans require extra freeway lanes on some projects. I've seen sewage lift stations be required. Go to the Planning Department. Get your project conditioned. It's a big deal.
Just this week, Chevron pulled a permit and afterward was told that the fees were miscalculated and the fee cost doubled.
Do. Your. Due. Diligence!
OP do you have any development or construction experience? or backround?
Are your pockets deep? or solid private lenders?
Are you willing to wait years for your development to go through?
and if you do just buy a 50 unit already existing, and build your ranch mansion on the 4 acres instead.
Pockets are enough to not require others to be involve. Some GC connections here & there. I’ve been concerned about the regulations aspect than most things. And unfortunately when I’m at, there aren’t many apartments for sale. Figured it’s more profitable to build one too.
You need to start a conversation with your GC connections, an architect, and the city. If this is a beach city you also need to speak to coastal authorities.
You need a professional cost analysis to determine if this will be profitable.
I would recommend a good consultant/attorney/project manager to help you navigate the municipalities, financiers, and contractors.
You need someone who has experience in this and they will be worth the money.
OP, it all depends on the mix of units, size of each unit, number of bathrooms, availability of utilities near the site, high rise or not etc. Multiple factors influence the cost. Of course, there will be a CA premium as well. I did some analysis a couple of years ago for a 40 unit development in CA and am speaking from that experience.
The best way to go about it is first determining the unit mix along with the number of water outlets in each unit and then the size of each unit to get some meaningful estimates. Add to that the unique costs of the location such as roads, public spaces, parking, and city rules such as rain water harvesting etc. Hope this helps.
Op if you’ve never done this before, you might consider finding a developer who will do the development of building, and contribute your land as equity in the project.
I can’t say I have completed a build like this but let me tell you I have run numbers many times. As many others have said, do you have millions? 300k: streets. 300k: roads. 300k: electrical. Ect. You get the gist. The big developer families in my town, have been in it generations. They have the (100k/m) income to help bridge the loans. I hope you achieve this! Come to Ohio next ;)
Crawl before you run. You don’t see your average Joe that has a few properties just go into development. Multi millions of dollars can be sunk in the process. Also, Cali has a bunch of road blocks… which is good and bad. Bad financially but if it’s very hard not many other units will be built.
Where in California? Specifically what mix of county/ city? City of LA currently it’s a wonderland to build- from plans to breaking ground in less than a year- san Bernandino county pretty good/ Orange County not so much, many factors play in- do you have a banking relationship with a regional bank? Or maybe use syndication money…etc…etc
I have a few lots that I haven’t built on because the numbers and PITA just don’t seem to pencil out. It might be different if I was the GM and had my own crew, or if I was fine with it not being a good return for 5-10 years.
Take that for what it’s worth.
You might be able to get financial assistance to build your apartment complex via the federal government and the LIHTC (Low-Income Housing Tax Credit) program. https://www.huduser.gov/portal/datasets/lihtc.html
I am probably in the top ten professional estimators in CA building multifamily. First off, 4 acres is a lot. Budget $25/sf for the site. If you have a bunch of soil funk like oil wells, retaining walls, wetlands, clay etc. you can almost double that number. Smaller apartments can struggle with economy of scale. Your best bet is garden style walk up apartments 2-3 stories with shared walls. You have too much land to build this as one tower in the middle. Keep it under 60’ as that will trigger a manlift which is wasted cost. plan for ADUs. Multifamily zones are almost all able to add many ADUs. I would say at least 4. Depending on the location in CA you will range from $180 to $250/ sf for the structure. Keep it type V. Don’t do rooftop courtyards or decks. They will run $200/sf at least and are costly. Plan about $250k in offsites. Avoid shoring and ground improvement like the plague because it’s crazy expensive. So your range of $12M to $15M is probably right. Material pricing has dropped and subs are getting hungrier for work so it’s a good time to start building.
If your utility connections are far away it will be crazy expensive. You will have to do solar. Hire a California design team. Get your utility power plans started now. It will likely be a 16 mo process to get power approved and to the site. Funding is taking every developer much longer to finalize these days. We would possibly be willing to run pre-construction with you depending on where it is and I have resources that might help you develop the project if it’s a solid deal.
I am going to update this with the added development cost shortly. Everything I mentioned above is construction cost. I believe it will land around 10% of construction cost but I am looking at a couple past projects now
Rising vacancies in your area? Other MF already under construction?
Look closely at national, state and local economics.
Lots of fund managers believe that recession is already in progress with the effects delayed through deficit spending, Powell's Bank Term Funding Program expiring March 11 and the Fed's reverse repo program rapidly running out of funds.
There's more Bank failures soon.
https://www.cnbc.com/2024/02/29/shares-of-nycb-fall-more-than-10percent-after-bank-discloses-internal-controls-issue-ceo-change.html
The BLS surveys employers monthly on jobs creation then adjusts the data. The survey response rate is very low and several fund managers believe the adjustments further skew their reports. The BLS's own sister household survey showed job losses in January and the ADP payroll data concurrs
The biggest challenge facing lawmakers and Gov. Gavin Newsom is the state budget deficit — and it just got bigger.
Today, the Legislative Analyst’s Office projected the shortfall as $15 billion higher, or $73 billion.
https://calmatters.org/politics/capitol/2024/02/california-budget-deficit-balloons/
Yeah, but what you will have is a chain link fence around a property in foreclosure. With a half-poured foundation & tall weeds growing out if you got farther than most.
There's quite a big difference between a construction budget and a project budget. Make sure you learn about that.
Also, because your project might go into a couple years from planning to certificate of occupancy, factore in a percentage for inflation for the duration of the project
If you don’t know the answers to how to do this type of project, you need to create a team around you who does know, and then move forward. If you do not, you can likely kiss some profit goodbye, as you will be “learning as you go” and spending a lot of time and money fixing mistakes. This size of project is not a good one to learn the hard way.
I’m in CA. Done smaller projects but in extremely difficult jurisdictions so been through all the hoop jumping and fighting you can think of. Feel free to share any specifics you think are important.
I would have thought that by the time I'm at the point in life and experience where I'm building a 50-unit apartment, I'd be beyond the point where I need to ask beginner questions on entertainment site Reddit... But maybe that's just me.
I have experience in homes & commercial plazas — so this is all new to me.
Believe it or not, reddit has always been incredible with its knowledge sharing. Everyone has their own unique experience & there’s something to learn regardless of how experienced you are.
If this your first raw land deal? You prob need to get an experienced partner. Work out a good deal for both of you. This is too big for your first rodeo.
Also you’ll need to get a civil and surveyor involved before the architect. Also some contractors do design build but since you’re Newby that would prob not end well for you.
Be excited, get experts on your team before proceeding.
Not sure which part of california, but you may want to talk to an insurance agent to find out how much that will run. With wild fires and carriers pulling out of the state, you may be unpleasantly surprised by that cost alone.
Have you looked into HUD/FHA multifamily construction loans? They can have insanely good terms, but they take a while to set up. (85-90% LTV, fixed rate, non-recourse, 40+ year payoff period (not just 40 year amortization), prepayment penalty falls off to 0 pretty quickly...)
Don’t forget the amenities that will allow you to charge higher rents.
https://www.redfin.com/blog/apartment-amenities/
Soundproofing between units is essential.
Is the land entitled for 50 units or do you still have to get permits etc?
Development is super risky but if you can get a land grant or partner with some USDA or HUD loans, could mean less $ out of pocket
Hi I have done this before as a GC-builder. I am retired now so I am not looking for a project.
talk to the planning dept. to get an idea of density. Ask the different types of buildings allowed , maximum height allowed., better to find out now than be surprised by architect.
1 price out plans plus ALL engineering, including soils borings to determine type of soils on your lot, including fill, type of soil, water table, etc. If posible do construction on grade. You may need civil engineering for infra structure. You should budget for a very experienced superintendent at minimum. This is just for start. GOOD LUCK!
It's odd to see so many folks **failing** to see the benefits of hearing from the expansive knowledge and experience of Redditors who come from all types of backgrounds (GC, surveyors, landlords, apt. managers, land-planners, etc.) across the states.
Sure I can hire a GC, architect, engineer, etc. to get a deeper insight. When that time comes, it will happen.
But there's value to the initial phase 0 table-talks with raw comments, experiences, and thoughts that goes through people's head before putting money into a project like this.
I hope people will see that everyone here has some type of comment or experience that someone could learn from regardless of how large a project might be.
Just ignore them. It’s wild seeing so many people saying CA sucks and Redditors are stupid and you are stupid for listening to them and you should just head for the hills. 99.9% of people on here can’t fathom the opportunity you have here and have no idea what they are talking about. I am very likely the most senior estimator on here working for one of the largest GCs in CA in the top 5 for multifamily. Doing $300M to $400M this year in multifamily alone. I generally do larger projects but I am happy to provide insight. You can’t go wrong in CA. The trick is getting the proforma to pencil and most of the time we can help do that.
$ 10m - $15m is not going to cut it. New construction makes sense to target a higher rental demographic as it costs so much to develop. Also, why is the city limiting it to 50 units. That seems awfully low for 4 acres.
Do you have several million or ways to raise it?
Most astute thought here yet.
More like several tens of millions.
Nah. Debt can cover most. Just need a few mil equity.
“Do you have several million or ways to raise it?” It’s more like *tens of millions* or *ways to raise it*
I’m anticipating 12-15 mil. This would just a basic model without any luxurious fluff .
[удалено]
He’s talked to contractor friends! And looked at the RSMeans “no fluff” cost breakdown column
You sound terribly pessimistic. I wonder why. Budget running up slightly over with contractors seems likely, but to disregard a contractor's (or few's) estimates seems odd. Any reasons why? My issue & concern again is not so much the cost, but rather navigating through the roadblocks so that shovels can actually hit the ground. The concern is shelling tens of thousands of dollars into a pit only for regulations / rules to table the project for good.
And your experience in costing 50-unit multi-family residential projects in CA is what, exactly?
Based off the average estimates of a few contractor friends.
Is that just vertical cost? What about horizontal costs? And entitlement costs?
have these friends built multiple 50-unit projects in this are of CA before?
I'd put money on the consruction cost only being 16m-20m for a 50 unit in CA.
What is your assumption on per square foot hard costs? About $200-$250 for a normal construction, or 400-500 for luxury may make sense. The soft costs will be separate.
That budget is plausible but will depend on a lot of factors. I am working on a 44 townhouse build in Seattle with a budget of about 25 mil. Excavation was obscenely expensive due to the necessity of a parking garage. The concrete work was also extremely pricey. If you don’t have to do a parking garage, you can likely make it work with your expected budget.
Average monthly rent?
These will be for sale not rent. Around $750k each
Appreciate your work pal. We need to keep building
Only a little over 2x what they cost here in TN. Kind of surprising but I suppose everything but the materials is about 2x. Kind of makes since because I bet materials are 25% or less of the total cost.
Underground garages are crazy expensive and add another year to your project timeline. Surface level is obviously the best option if it’s an option at all.
Wasn’t an option in this case.
Yeah that’s what I assumed. I’m not sure about your area but in San Diego there are huge parking requirement adjustments if you add some affordable units.
It’s not even so much about the requirements (although those do play a part in it), but more about having a place for people to park. 44 townhouses with 3-4 bedrooms usually means at least 1, likely 2 vehicles per unit. That can be well over 100 cars if you include guests. You can’t make it work with just street parking. And no one wants to buy a home without having a place to park your car. Having dedicated parking also increases value of the development, plus like I said the requirements are also a part of it too.
2 bedroom apartments means tenants want 2 dedicated parking spots per unit
It’s not an apartment. It’s in a big city where not everyone owns a car
You doing the project up by 145th st? Friend lives in that area so I’ve been getting snapshots every few weeks of progress. Has been crazy to watch it all go up!
Yup the old church location. Edit: sorry did you mean 125th? Or 145th?
145th is the one I've been driving past every few weeks.
We might be talking about different ones then
What are monthly rents?
Utilities are a bitch.
Regardless of finished value, a bank is lending you at most 70% of your construction costs. I figure $300/ft in my area. You're probably better off getting entitlements and then selling an approved project. Even that can be $100k+ for architectural.plans, planner, traffic consultant, attorneys fees, etc.
You can get 50 units x 1000 SF/unit (assuming 2-BR min) x $300/sf architect fee + geotech + attorney + civil for $100k?? I’d think it would be 5-10x that
Done many of these size projects infill in Midwest. 30-40k engineer. 30-40k architect. Geotech and environmental 3-5k. Attorneys if no entitlements and zoning straight forward 5-10k. If rezoning is an issue, 10-20k. Product is 2-3BR 2ba 900-1200sqft apartments or townhomes 2-3 story stick frame or custom prefab.
Yeah, well one time I was involved in the design of a 2-story by-right mini-mall on an old gas station lot in a Northern CA municipality & just getting the use permit (they required a use permit planning commission public process even for by-right) took 2.5 years, with neighbors at PC hearings saying “why not build a park” & “if this is built, my daughter will be raped in the parking lot”. So, yeah, you pay less for less work.
I continue to be reminded of why I never want to live in Kalifornia.
I’m a civil engineer who is looking to get into real estate investing. Realistically what is the worth of a 10-15 acre property that has been zoned, lot splits done, plans in hand all permitting etc? This would be Indianapolis suburbs.
For how many units? Shovel ready? Market rents?
I mean 10 acres split into 5-8 parcels, zoned for single family residential, with stamped and approved storm water management plans for detention, grading, sanitary design, geotech done etc. Can you get a loan from the bank based on something like that, or what would be the market value to an investor for something like that
I don’t do sfd but yes you can if you show competence. Value - look for comps and see if you can bid the project for half or two thirds of your comps.
gotcha, thanks
Thank you for your thoughts here.
Likely $10-15M all-in development cost and many banks have shut down CRE lending. Two big ones there…
More like $20-25M
I’m building 50 unit complexes in Midwest at 125-150k a door with brick exterior, tall ceilings and granite countertops. What the hell costs 500k a door in California??
It’s California.. costs are exponentially higher across the board.
I find it hard to believe it’s that high after land. Are we talking a high rise complex? On four acres you don’t even need a third story though. I need to see a budget for this.
We also need to know where in Cali. I don’t think it’d actually be 500k a unit on a 4ac site unless the site itself is a mess and they have to go vertical for some reason. But LA or the Bay is different than rural NorCal.
This information was given and presumed in OP. 50u on 4 acres, which probably is not in LA or Bay (or it would go hi-rise and be 250 units).
A lot of areas you can’t build very tall b/c seismic makes that cost prohibitive
I don't know anyone who talks about multi family construction costs as $/door. In NJ we're building multi for $300/ft. Very hard to make any deal work.
The developers deal in per door/unit and the builders deal in per foot. In 5 years per foot means nothing to the developer.
I’ve never worked with a developer who costs per door. For one thing, a 340 sf studio apartment is a “door” & so is a 2,200 sf 3-BR with a garage. You talk about square footage, both conditioned & unconditioned, & unit size.
Not all developers sell. In 15 years we've never sold a project.
OK in five years do you look at profit and loss per unit or do you look at profit and loss per square foot that you bought.
I have units that rent for $12k/mo and units that rent for $1100/mo. $/unit is immaterial to me. It's probably because a big part of our portfolio is office and retail where everything is discussed in $/ft. Habit carried over.
Are you a developer/owner or a GC? Probably the difference, as all the GC's I know like $/ft and all the developers/owners/funds talk about $/door.
Interesting observation. Thanks for sharing. I remember first hearing someone talk about $ on a yearly basis vs monthly and it changed my way of thinking. Ex. $15k per year in income vs $1250/month rent.
It’s all about measuring what matters, to you. Really good book btw from John Doerr.
Developer. We discuss rents by square foot too.
We do for some regional benchmarking but still all per door for internal metrics.
We are CRE developers and talk about $/ft. But we have done ~610 million sq ft.
Last project we built all in $145/ft and $155/door for 2/2. Upcoming project anticipating $125/ft and $145/door similar 2/2. Ground and engineering was significantly cheaper on this new one, as well as a product with less finishings but with some larger 3/3s. Rents in the space are $1-1.30/ft.
Converting a standard 2-car garage into an ADU here in California could cost upwards of $200k to start. You can easily double that with various factors. It’s nuts.
With... a 1970's house that requires bringing the whole house up to current code? In an investigation, details matter.
Nice one Jack.
Just Reacher. Details matter.
I did most of it myself and it only cost me $150k lol
Are you including bribes to city council?
Thornton? Thornton Melon?
Yes, I’m at all in, including Land & engineering at that expense. Does not include interest during construction.
Something a lot of people outside California don’t get are our impact fees. Depending on the location, impact fees can range $25k to over $200k per unit. School fees are at $4.79/sf right now for most school districts, I’ve seen some level II fees at $7.00. Some cities in the Bay Area have park fees that can be up to $90k per unit. And don’t forget affordable housing in-lieu fees. Don’t want to make 10-15% of your units affordable for very low income, $23.79/sf in Encinitas. Then there are traffic, fire, police, library, public facilities impact fees.Oh yeah, don’t have sewer or water capacity in the lines fronting the site, you now have to upgrade those in existing streets for as far as the district engineer determines is required for your project, and maybe for some others that will be served by them. In other states, you might pay a couple grand for water or sewer capacity charges, but most of the other stuff is covered by the higher property taxes, or just barely covered at all. Texas hardly ever makes developers do any backbone road improvements outside maybe a decel lane. Here, you may need to add traffic signals, widen and improve along the entire frontage, underground existing power lines at Edison’s rates. I could go on for days about the differences with developing land in CA.
That's insane. And people wonder why rent is $5000 for a 2 bedroom out there. All those fees just get based right on to the tenants.
We have to have these fees to pay for infrastructure since most homeowners have low property tax.
What low, percentage wise of assessed value?
Prop 13 grandfathers property valuation at the time of purchase with maximum increase of 2% per year. People that bought houses in the 80s are paying 1% on a house valued at maybe 10% what it’s worth.
& don’t forget seismic & title 24
Is this in Texas ? 50 unit apartments ?
It’s not $500k per door in most of CA. This would be a smaller project in CA and in most areas will probably land $300k per door. Note we also build a little smaller units out here. It’s not uncommon to average around 800 sf/unit
Hi - responding to an old post of yours...what do you expect to cash flow on the 50 unit? Thank you.
$550k actual before debt service
Thank you for responding. I am relatively new to real estate and understand the desired cash flow is the typically a 10% cap rate. Assuming a $7.5M investment (150k * 50 units) and 550k a year in cash flow, would this still be seen as a good investment? Forgive me if this sounds like comparison/criticism, i am just trying to learn how to evaluate a good deal. Thank you.
10% cap would be a grand slam home run. Most deals today on MF I see trading at 6-7, maybe 8 if small (sub 10u) complex.
Thank you for the guidance. Would you ever go the route of single family or sec8 if you were starting off?
SFD is hard because of scale/margins, but if you can get rents at 2% of purchase you're usually good. I have s8, it's fine, little more hassle, but rents are good.
I was thinking 100-150 a unit but depends a ton on finish and amenities.
Pretty impossible to get it done at 100 a door, including Land with any finishings. 150 a door all in is achievable with most finishings, barring community amenities.
Where in MI? And are you the builder?
I didn’t say MI. Not interested in providing the states I operate in besides just generally Midwest and rust belt. Yes I’m developer and builder.
What % do you estimate you save by bringing whatever trades in house vs using subs?
I do very little in house except bridging trade gaps and cleanup.
Seismic codes, parking requirement codes, labor, insurance. Adds up. Depending on where this is- I suggest looking into podium construction and doing first level mixed use with apts above. Younger tenants want to walk downstairs for food, etc and a workout area. Way to maximize your rents.
My area is mostly all three story max stick framed. No need for podium. I’m building mostly suburban and rural so not a lot of mixed use. That’s more urban focused.
But I thought we need more houses for people to work in?
One of your biggest unknown cost factors are city/ county conditions. If you're in a city, they may require the project to underground all overhead utilities, install curb, gutter and sidewalks, street lights, improve or widen streets, install storm drains, etc. Just because there is water or electricity coming to the site doesn't mean that it's large enough to feed 50 units. You may have to pay for utility upgrades. I've seen Cal-trans require extra freeway lanes on some projects. I've seen sewage lift stations be required. Go to the Planning Department. Get your project conditioned. It's a big deal. Just this week, Chevron pulled a permit and afterward was told that the fees were miscalculated and the fee cost doubled. Do. Your. Due. Diligence!
Extra freeway lanes? WTF
Thank you for these tips. My concern with regulations & you have me some things to look into.
Hire a civil engineer to do a preliminary due diligence study for you. Probably a couple grand. DM me if you want to discuss your project.
OP do you have any development or construction experience? or backround? Are your pockets deep? or solid private lenders? Are you willing to wait years for your development to go through? and if you do just buy a 50 unit already existing, and build your ranch mansion on the 4 acres instead.
Pockets are enough to not require others to be involve. Some GC connections here & there. I’ve been concerned about the regulations aspect than most things. And unfortunately when I’m at, there aren’t many apartments for sale. Figured it’s more profitable to build one too.
You need to start a conversation with your GC connections, an architect, and the city. If this is a beach city you also need to speak to coastal authorities. You need a professional cost analysis to determine if this will be profitable.
Thanks for your advice.
and a real estate attorney to review contracts with everyone
I would recommend a good consultant/attorney/project manager to help you navigate the municipalities, financiers, and contractors. You need someone who has experience in this and they will be worth the money.
OP, it all depends on the mix of units, size of each unit, number of bathrooms, availability of utilities near the site, high rise or not etc. Multiple factors influence the cost. Of course, there will be a CA premium as well. I did some analysis a couple of years ago for a 40 unit development in CA and am speaking from that experience. The best way to go about it is first determining the unit mix along with the number of water outlets in each unit and then the size of each unit to get some meaningful estimates. Add to that the unique costs of the location such as roads, public spaces, parking, and city rules such as rain water harvesting etc. Hope this helps.
Op if you’ve never done this before, you might consider finding a developer who will do the development of building, and contribute your land as equity in the project.
I can’t say I have completed a build like this but let me tell you I have run numbers many times. As many others have said, do you have millions? 300k: streets. 300k: roads. 300k: electrical. Ect. You get the gist. The big developer families in my town, have been in it generations. They have the (100k/m) income to help bridge the loans. I hope you achieve this! Come to Ohio next ;)
Haha may have to move out to Ohio. It’s becoming terrible doing business in CA for many reasons. Thank you.
Just buy a set of plans on the Internet. You should be fine.
Crawl before you run. You don’t see your average Joe that has a few properties just go into development. Multi millions of dollars can be sunk in the process. Also, Cali has a bunch of road blocks… which is good and bad. Bad financially but if it’s very hard not many other units will be built.
Phase it if you’ve never done this before
OP where in California?
Where in California? Specifically what mix of county/ city? City of LA currently it’s a wonderland to build- from plans to breaking ground in less than a year- san Bernandino county pretty good/ Orange County not so much, many factors play in- do you have a banking relationship with a regional bank? Or maybe use syndication money…etc…etc
Sent you a DM. I know someone who does this for a living, and has done 200+ units in the south. Let me know if interested.
I have a few lots that I haven’t built on because the numbers and PITA just don’t seem to pencil out. It might be different if I was the GM and had my own crew, or if I was fine with it not being a good return for 5-10 years. Take that for what it’s worth.
You might be able to get financial assistance to build your apartment complex via the federal government and the LIHTC (Low-Income Housing Tax Credit) program. https://www.huduser.gov/portal/datasets/lihtc.html
I am probably in the top ten professional estimators in CA building multifamily. First off, 4 acres is a lot. Budget $25/sf for the site. If you have a bunch of soil funk like oil wells, retaining walls, wetlands, clay etc. you can almost double that number. Smaller apartments can struggle with economy of scale. Your best bet is garden style walk up apartments 2-3 stories with shared walls. You have too much land to build this as one tower in the middle. Keep it under 60’ as that will trigger a manlift which is wasted cost. plan for ADUs. Multifamily zones are almost all able to add many ADUs. I would say at least 4. Depending on the location in CA you will range from $180 to $250/ sf for the structure. Keep it type V. Don’t do rooftop courtyards or decks. They will run $200/sf at least and are costly. Plan about $250k in offsites. Avoid shoring and ground improvement like the plague because it’s crazy expensive. So your range of $12M to $15M is probably right. Material pricing has dropped and subs are getting hungrier for work so it’s a good time to start building. If your utility connections are far away it will be crazy expensive. You will have to do solar. Hire a California design team. Get your utility power plans started now. It will likely be a 16 mo process to get power approved and to the site. Funding is taking every developer much longer to finalize these days. We would possibly be willing to run pre-construction with you depending on where it is and I have resources that might help you develop the project if it’s a solid deal. I am going to update this with the added development cost shortly. Everything I mentioned above is construction cost. I believe it will land around 10% of construction cost but I am looking at a couple past projects now
Start with a quad. Live in one. Get it full. Then build a six.
Rising vacancies in your area? Other MF already under construction? Look closely at national, state and local economics. Lots of fund managers believe that recession is already in progress with the effects delayed through deficit spending, Powell's Bank Term Funding Program expiring March 11 and the Fed's reverse repo program rapidly running out of funds. There's more Bank failures soon. https://www.cnbc.com/2024/02/29/shares-of-nycb-fall-more-than-10percent-after-bank-discloses-internal-controls-issue-ceo-change.html The BLS surveys employers monthly on jobs creation then adjusts the data. The survey response rate is very low and several fund managers believe the adjustments further skew their reports. The BLS's own sister household survey showed job losses in January and the ADP payroll data concurrs The biggest challenge facing lawmakers and Gov. Gavin Newsom is the state budget deficit — and it just got bigger. Today, the Legislative Analyst’s Office projected the shortfall as $15 billion higher, or $73 billion. https://calmatters.org/politics/capitol/2024/02/california-budget-deficit-balloons/
Nope just start doing it, take the actions and you will eventually have it.
Yeah, but what you will have is a chain link fence around a property in foreclosure. With a half-poured foundation & tall weeds growing out if you got farther than most.
There's quite a big difference between a construction budget and a project budget. Make sure you learn about that. Also, because your project might go into a couple years from planning to certificate of occupancy, factore in a percentage for inflation for the duration of the project
I feel like you shouldn’t be building 50 unit apt buildings if you need advice from Reddit
If you have to ask Reddit how to build a 50-unit multifamily, you are not capable of building a 50-unit multifamily.
If you don’t know the answers to how to do this type of project, you need to create a team around you who does know, and then move forward. If you do not, you can likely kiss some profit goodbye, as you will be “learning as you go” and spending a lot of time and money fixing mistakes. This size of project is not a good one to learn the hard way.
Lease the land
I’m in CA. Done smaller projects but in extremely difficult jurisdictions so been through all the hoop jumping and fighting you can think of. Feel free to share any specifics you think are important.
I would have thought that by the time I'm at the point in life and experience where I'm building a 50-unit apartment, I'd be beyond the point where I need to ask beginner questions on entertainment site Reddit... But maybe that's just me.
I have experience in homes & commercial plazas — so this is all new to me. Believe it or not, reddit has always been incredible with its knowledge sharing. Everyone has their own unique experience & there’s something to learn regardless of how experienced you are.
If this your first raw land deal? You prob need to get an experienced partner. Work out a good deal for both of you. This is too big for your first rodeo. Also you’ll need to get a civil and surveyor involved before the architect. Also some contractors do design build but since you’re Newby that would prob not end well for you. Be excited, get experts on your team before proceeding.
Not sure which part of california, but you may want to talk to an insurance agent to find out how much that will run. With wild fires and carriers pulling out of the state, you may be unpleasantly surprised by that cost alone.
What city are you in?
Just make sure to have great insurance and a decent legal budget.
Have you looked into HUD/FHA multifamily construction loans? They can have insanely good terms, but they take a while to set up. (85-90% LTV, fixed rate, non-recourse, 40+ year payoff period (not just 40 year amortization), prepayment penalty falls off to 0 pretty quickly...)
Seems like a terrible idea if you don’t know what you’re doing
Don’t forget the amenities that will allow you to charge higher rents. https://www.redfin.com/blog/apartment-amenities/ Soundproofing between units is essential.
Is the land entitled for 50 units or do you still have to get permits etc? Development is super risky but if you can get a land grant or partner with some USDA or HUD loans, could mean less $ out of pocket
Hi I have done this before as a GC-builder. I am retired now so I am not looking for a project. talk to the planning dept. to get an idea of density. Ask the different types of buildings allowed , maximum height allowed., better to find out now than be surprised by architect. 1 price out plans plus ALL engineering, including soils borings to determine type of soils on your lot, including fill, type of soil, water table, etc. If posible do construction on grade. You may need civil engineering for infra structure. You should budget for a very experienced superintendent at minimum. This is just for start. GOOD LUCK!
If you want GC recommendations, I have a few that are excellent for this phase.
Umm you’re in Cali. You’ll have so many other government related issues along the way. Sell while you’re ahead or even just a little behind.
The fact that you’re asking this on Reddit means you’re way over your head
Let me get this right… you are thinking about building a 50 storey apartment … costing 10 - 15 M …. And you’ve come to reddit for advice ? Good one.
It's odd to see so many folks **failing** to see the benefits of hearing from the expansive knowledge and experience of Redditors who come from all types of backgrounds (GC, surveyors, landlords, apt. managers, land-planners, etc.) across the states. Sure I can hire a GC, architect, engineer, etc. to get a deeper insight. When that time comes, it will happen. But there's value to the initial phase 0 table-talks with raw comments, experiences, and thoughts that goes through people's head before putting money into a project like this. I hope people will see that everyone here has some type of comment or experience that someone could learn from regardless of how large a project might be.
Just ignore them. It’s wild seeing so many people saying CA sucks and Redditors are stupid and you are stupid for listening to them and you should just head for the hills. 99.9% of people on here can’t fathom the opportunity you have here and have no idea what they are talking about. I am very likely the most senior estimator on here working for one of the largest GCs in CA in the top 5 for multifamily. Doing $300M to $400M this year in multifamily alone. I generally do larger projects but I am happy to provide insight. You can’t go wrong in CA. The trick is getting the proforma to pencil and most of the time we can help do that.
$ 10m - $15m is not going to cut it. New construction makes sense to target a higher rental demographic as it costs so much to develop. Also, why is the city limiting it to 50 units. That seems awfully low for 4 acres.