Building Townhomes-Salem Oregon 94 Developed lots- build or sell?
We purchased a townhouse subdivision with all infrastructure completed, (roads, sewer, etc.) There are 94 fee simple town home lots. Originally purchase 2012 from a bank, with real estate picking up in our area over the last 2 years, it is time to sell or build. This is a narrow lot subdivision with the units to have shared walls in groups of 3-6 doors. (See image). The project is in S. Salem, (a desirable part of town) and average "house" prices are in the $150-160 a foot for new construction (and rising). With he recession, only a few subdivisions have been built but a number are in the works. The lot prices are ranging from $75,000-95,000 for your standard 6000 sq ft-8500 sq ft lot. NOTE- These are not standard lots- they are town house lots. A current estimate to build the same project today would cost about $25,000 a lot? for the hard/soft cost plus around $150,000 an acre (RM2) land (6 acres) . Total ($3,250,000). The project is across the street from one of the newest Middle schools/ Parks. Traffic is good.
We are analyzing the cost benefit of selling the project as to a builder vs building (with a hired builder) ourselves. We have estimated the build cost at a total build cost (including land, legal, SDC, permits to be at $80-$85+/- a foot. The other townhouse subdivision project built by Hayden is a few miles away and was not very successful. (Built in 2007/8 and got caught by the downturn)
The current market for new homes in South Salem is good without a single home under $279,000 (using Redfin). It would seem that a $225,000 or less town home in this part of town, near good schools and nicely built should sell well. The units are smaller (average 1300 sq ft) at $155 a foot, it still puts the price in the $200,000+ range. The next "house" that one could buy is starting at the $279,000.
We really are considering a bulk sale (Although to maximize our price we may have to do a 3-5 phase take down at $45,000 (3 phase) to $49,000 (5 phase) take down for a builder to digest.
Typically we would do a 1031 exchange even though the market is tight (no reasonable deals on apartments), but I can usually dig up some dynamic properties with upside based on creative marketing. Even a 5 phase sale can be used in a 1031 since the original design of this purchase was to invest and sell. Just finding 5 properties over the next 18 months is challenging.
The land is zoned RM2 for multifamily (which salem has a lack of (this year) and the project could be converted to a Multifamily 130+/- apartment complex at a rental rate of around $1 a foot.
As well- we could do a hybrid version of this project and reduce the lot numbers to 47 and do a modified attached house with a much larger lot and foot print but still sharing a common wall.
Let me know you can offer any "Wisdom" with a project like this. If we could get the $2,800,000- $3,500,000 (1031) for the book sale of the property vs building it out for $5,000,000-$6,000,000 total profit based on $150+/- a foot.
Love to hear from others- Thank you for your time
Chris
I think the net profit numbers are high- units will be 1300+/- sq ft. Number may be closer to %30 not the %34-%39 shown at the bottom
6 plex
| BUILDING PERMITS ( | $97,200.00 | single $16,200.00 |
| UTILITIES | $0.00 | $500.00 |
| EXCAVATION | $24,000.00 | $4,000.00 |
| GRAVEL | $2,500.00 | $416.67 |
| CONCRETE PUMP | $1,750.00 | $250.00 |
| CONCRETE | $18,000.00 | $3,000.00 |
| FOUNDATION/CONCRETE-LABOR | $9,000.00 | $1,500.00 |
| CONCRETE CUTTING | $750.00 | $125.00 |
| SEWER | ||
| CONCRETE FLAT WORK | $12,000.00 | $2,000.00 |
| FRAMING LABOR | $21,000.00 | $4,947.00 |
| ROOF TRUSSES | $14,300.00 | $1,831.67 |
| BUILDING MATERIALS | $70,000.00 | $19,128.40 |
| WINDOWS & SKYLIGHTS | $8,500.00 | $1,419.38 |
| EXTERIOR DOORS | $5,400.00 | $1,050.00 |
| ROOF COVER | $16,800.00 | $2,800.00 |
| GAS FIREPLACE | $6,000.00 | |
| SIDING LABOR | $13,115.00 | $2,185.00 |
| GARAGE DOOR | $4,914.00 | $819.00 |
| GUTTERS | $2,400.00 | $525.00 |
| PLUMBING | $30,000.00 | $7,000.00 |
| HEATING | $30,000.00 | $4,800.00 |
| AIR CONDITIONING | $0.00 | |
| NEST THERMOSTAT | $325.00 | |
| GAS BBQ | ||
| GAS DRYER | ||
| ELECTRICAL | $21,000.00 | $4,000.00 |
| MASONRY | $3,000.00 | $500.00 |
| INSULATION | $12,000.00 | $2,735.00 |
| SHEET ROCK | $21,000.00 | $7,100.00 |
| SHEET ROCK GYP BOARD | $750.00 | |
| INTERIOR TRIM | $16,500.00 | $2,500.00 |
| TRIM LABOR | $12,000.00 | $2,500.00 |
| SECURITY SYSTEM | $900.00 | |
| FINISH HARDWARE | $2,400.00 | $350.00 |
| UNDERLAY LABOR | $1,500.00 | $250.00 |
| CABINETS | $24,000.00 | $4,854.40 |
| COUNTERTOPS | $11,100.00 | $1,850.00 |
| MANTLE | $1,200.00 | |
| TILE | $9,000.00 | $1,597.80 |
| VINYL AND FORMICA | $3,000.00 | $207.43 |
| HARDWOOD FLOORS | $6,600.00 | $1,138.10 |
| CARPET | $13,000.00 | $2,110.10 |
| PAINTING | $25,200.00 | $5,359.25 |
| WATERPROOF DECK | $0.00 | $0.00 |
| KITCHEN APPLIANCES | $8,400.00 | $1,400.00 |
| LIGHTS | $3,000.00 | $500.00 |
| SHOWER DOOR &MIRRORS | $3,000.00 | $790.00 |
| FINAL CLEANING | $2,400.00 | $400.00 |
| PICK UP. GARBAGE | $4,500.00 | $750.00 |
| LANDSCAPING | $10,000.00 | $1,500.00 |
| DECKS | $0.00 | $1,000.00 |
| MISC PICK UP LABOR | $1,500.00 | $250.00 |
| JOB TOILET | $720.00 | $150.00 |
| PRINTS | $0.00 | |
| RENTALS | $900.00 | $100.00 |
| DEMOLITION | $0.00 | |
| PAVING | $0.00 | |
| TREE REMOVAL/CONSULTING | $0.00 | |
| SOIL EROSION | ||
| FIRE INSURANCE | ||
| LIABILITY INSURANCE | $1,200.00 | |
| INTERIOR DECRO | ||
| OVERHEAD & PROFIT (Builder) | $30,272.45 | $6,033.21 |
| CONTINGENCY 1% | $6,054.49 | $1,206.64 |
| HARDCOSTS TOTAL | $641,775.94 | $127,904.05 |
| LOT PRICE | $72,000.00 | $12,000.00 |
| SUB TOTAL | $713,775.94 | $139,904.05 |
| REAL ESTATE COMM. | $72,540.00 | $15,335.70 |
| TOTAL | $786,315.94 | $155,239.75 |
| SQUARE FOOT | 7800 | 1649 |
| SQUARE FOOT PRICE | $82.28 | $77.56 |
| ESCROW FEES | $6,000.00 | $1,000.00 |
| SALES PRICE @ $155 A FOOT? | $1,209,000.00 | $255,595.00 |
| NET PROFIT | $416,684.06 | $99,355.25 |
| PERCENT RETURN ON TOTAL | 34.47% | 38.87% |
