Buy land and develop multi-family?

Question

What are your thoughts on finding land and developing/building multi-family units? Depending on price of land seems it could potentially be a good investment depending on builder etc. For reference our area (NW Arkansas) rents are anywhere from $1000-$2000 on average but there are outliers in both directions. We are also home to 3 fortune 500 companies JB Hunt, Tyson Foods, and the king: Wal-Mart. We have 25 families moving here every day, we need more multi-family options. Anyone done anything similar?

Arn Cenedella · Answer

@Tim McKelvy

I am considering building MF in Greenville SC, also.

Development is not for the faint of heart especially with debt markets all over the place.

Ballpark, figure it will cost $150K to $175K to build a new apartment unit including land soft costs infrastructure debt service etc etc etc.

No way to answer your question in a vacuum.

You need a specific property and a specific market study - and a plan - to determine fair market rent for the units you build.

They better rent for close to $2000 or more or new construction won’t make sense.

Unless one is an experienced developer, this doesn’t strike me as the time to build.

That being said, if you can find a smaller project to build, you might proceed. It may not go as you wish and you may be wounded but you will live to fight another day. 😀

The costs to develop raw land are high and if you haven’t done it before, the costs may blow you away.

So be cautious.

Are you building to sell or building to hold long term?

If long term hold, then you have a greater chance of success and don’t have to worry about specific market timing.

Good luck….

Amin Akhmadi · Answer

@Tim McKelvy

Just buy ready. That way you know exatly what you'll pay.

Amin Akhmadi · Answer

@Tim McKelvy

Bad idea, Tim. Think about all the time that would be wasted in such scenario. Notwithstanding the money that you'll get out of the circulation, for that amount of time.

Just look at deals under price, and get them to get cashflow from day one.

Developing have too many moving parts.

Highly not recommend it!

Tim McKelvy · Answer

Thanks for the input.  Would likely not be a massive project, duplex minimum and 4 plex maximum.  More than likely be buy and hold, even as we continually have people moving to our market, new construction does scare me a little. Worried it will turn into a money pit!

Buy land and develop multi-family?

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