I'm new to the BP forums, and I am really interested in learning more about real estate - especially multi-family. I've always been interested in real estate, but I am now taking a very active role in educating myself to help my family.
My father recently purchased a small multi-unit apartment complex in Los Angeles. My father has never done anything like this before and is new to real estate. He is an entrepreneur with a successful business, but I am a little worried he is going in a little over his head with his real estate development project. He has plans to demolish the building and build a new-construction 30 unit complex in the next year or two once the current tenants leave.
My question is, does anyone have any tips or resources on helping make this project a success? I want to take an active role in this and make sure that I am educated and soak up as much knowledge about new construction multi-family units as possible. If anyone has any resources or specific tips and things to look out for, please let me know.
Disclosure: Interested in bidding on some trades of the project.
This is a big undertaking, however, if he is an entrepreneur, he should be able to understand the basic ups and downs on the financial side on buying and selling, the only thing that he needs to educate himself and you is the ins and outs of development/construction. SF and MF are two different things, and I would assume he will be building some condos or row houses for this? Not sure how much he bought it for, but why not just rehab the thing and raise rents or re-purpose it? Demolition ipand development is a costly route. If he embarks on this, he should consider hiring a project manager that will work with the GC to protect his interest, I suggest not to hire someone within the family or friends so in case there is an issue, you could sue the PM. This won't be a regular business transaction, there are a lot of things at play, one might be, during the initial developer bidding, there might be builders that aren't accurate and will render a low bid to secure the contract and bombard you with change orders, OR a slightly higher and more accurate bid that has minimal to no change orders. The list is never ending on scenarios. Remember that the initial bidding should vary tens if not hundreds of thousands dollars, so don't be surprised by that, same goes for change order totals and timeline could vary in weeks or months.
The Urban Land Institute published a great book called Multifamily Housing Development Handbook. You can search for it on Amazon and it's available in Kindle.
I'd recommend he takes on an experienced partner, its very easy to make big mistakes when you do these.
I agree with @Chris Field . You (or your dad) could call up a few local developers whose work you like and sound them about a deal. Depending on what you bring to the table (obviously land but also capital, credit, experience, connections....) and how much control you want, you should be able to figure out a deal that works for everyone.
As an example, I know someone who snapped up an unsalvageable property in a great location for pennies. He struck a deal with a local developer to raze it and turn the site into mixed use mutlifamily urban infill. The developer does all the work and provides the financing so he gets the lion's share of rewards, but it's still worth it to the land owner to get a large check each month for doing nothing.
@Karen Margrave would be a good person to speak to. She's a GC/realtor and has her own development company. She mostly does RE development in the OC and has a wealth of local knowledge.
Good luck to you and your dad on your endeavor!
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