Costs for Developing Raw Land - Multi Family - Apartment Complex

7 Replies

Hi Guys,

I'm not a commercial guy but would like to learn and have also come across a few leads that I just didn't know where to start in analyzing?

Hoping I can get some basic questions answered? I'm sure there are a lot of variables that would come into play not normally seen with regular single family residential so by all means share what ever you can.

My goals here is to wholesale any lots I come across but need some basic numbers that a developer is considering.

What makes a raw land deal worth pursuing?

What goes into a MAO calculation for land development?

I've heard the number for MAO in development be 30-40k/unit here in the Seattle and Central Puget Sound Area.

Is that all inclusive with land and planning costs?

If a wholesaler came to you with a deal, what do you want to see in the package?

Lets use an Example.

If I came to you with a 15 acre very level parcel that needed trees removal and not much grading. Utility connections nearby. It was zone commercial and be developed with a minimum of 150 units to a maximum of 450 units. 15 minute drives to major employment centers and shopping

Would it be a good deal at 2M / 3M / 1M?

Why or why not.

Thanks guys!!!

(360) 979-9375

Are we to simply ignore EVERY hyperlink as an inappropriate advertisement?  

If everybody would realize that a hyperlink in the body of the post is meaningless and inappropriate to the body of the post, would they eventually disappear?

Originally posted by @Mike Carpenter :

Are we to simply ignore EVERY hyperlink as an inappropriate advertisement?  

If everybody would realize that a hyperlink in the body of the post is meaningless and inappropriate to the body of the post, would they eventually disappear?

Hi Mike,

Was this reply meant for me? I have no hyperlinks in my post???

(360) 979-9375

@Frank Matanane I can't really help with this as I don't have any experience in raw land but am following because it's something I too would like to learn more about. 

I'll try to help a bit though as I'm hoping to learn from your thread. I think the costs you're/your buyer's looking at to do the development will be very specific to the local area. The only way to get a true cost would be to find someone local who is doing it. 

So my suggestion would be to find any local land in the area that is being developed. You could get this from brokers, the government records on land development, tax records or just from driving around. Talking to the contractors working on a raw piece of land will tell you a lot.

That should lead you back to the developer. Try to help them out with something.

As you mentioned there are a lot of variables (almost endless), so I would recommend trying to get as much site specific information as possible.  See if you can get a site plan and team up with a good site contractor for your improvement costs.  Once you have the improvement costs, you can get your 'blank' (raw land + improvements) costs and then you network with qualified realtors (be sure they are area specific) and see what a blank lot can sell for. 

Based on most market conditions right now, improved lots are selling at a premium and if you network with local builders/developers you can move them quickly if they are priced right in good areas for a good profit.  

The value of the land is the value as improved minus the costs (hard/soft/site development/entrepreneurial profit) to get it there. You may be able to estimate that based on what other people are telling you. A more common way to estimate the value of land (absent data) is to look at land sales in terms of $/SF, $/dr, etc.

You should also consult a local architect because zoning regulations, setbacks, build-to, height requirements, parking requirements, etc will all vary. I hate it when I see a land deal advertised for let’s say 100 units but when you really do your own homework maybe you can build 100 micro units or there’s no room accounted for enough parking, etc. Your sales numbers should really be based on some type of pro forma, which accounts for amount of units at x square feet per unit, etc, and general costs associated.

Frank,

Take it your dealing with principle? You need to get valuation so you need to see what stage the property is in now and what it take $$$ to get the highest and best use out of the property. You are not providing enough details here. Find these things out then you know what value you need to get it under contract and you never know you may flip it to a developer.

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