Build a Multifamily from the ground up anyone?

Question

Does anyone have recent experience building Multifamily  homes from the ground up, most specifically in the South Florida market? I have stumbled upon several deals that in my opinion are not worth salvaging….I am thinking about building 4-8 unit buildings.

Interviewed a few developers and the price ranges varied dramatically…from $280-$600 per built sq ft. This would would a 6 unit (2/2) construction at roughly $2.4m + land value and holding costs during the constructions…which is expected at 1-2 years.

The upside I see is that I could fetch more in rent for a newer unit…but the price of construction and waiting doesn’t seem like a dream either.

Ps: I would find using money down and a construction loan.

Thoughts?

Ronald Rohde · Answer

Sure, whats your MF and cap ex experience? Its not something easy to do. You'll have to front a lot of cash over a long period of time with ZERO return. Can you do that?

Shafi Noss · Answer

I am building a duplex and a SF home in Austin right now ARV appraised at 3.3M combined.

When you say developers do you mean GCs? You should be able to pin that number down more precisely by specifying the quality of the finishes and square footage of the home. Have you worked with an architect to estimate what the zoning will allow you to build?

Total costs will be more than land + construction + holding costs. Remember that you will need to pay architects, engineers, closing costs, permitting fees, you may need an environmental report and other so called soft costs which usually need to be paid in cash upfront before financing. It is also a good idea to budget an extra 10% as a contingency, your lender will usually finance this so that is good.

If you build yourself you can spend much less money than buying an equivalent building, but in exchange you take on the market risk and execution risk. Is there an opportunity cost with your money? Developing can be very profitable but also very risky. I think just decide whether it sounds worth it. If it doesn't don't waste time and find something you're happier with, if it does keep taking the next step to get a clearer picture of what would be involved.

My thoughts.