Built a 56 Unit Passive House Apartment Complex in Georgia. AMA!

86 Replies

Hey guys my name is George and about a year ago I posted on BP in regards to a 36 unit development that we finished in Moultrie GA. We built it for around 1.5 million, post construction Refi appraisal came out to 2 million(~500k net) and today it has sold for 2.7 million(another ~700k net). Since the post over a year ago there's lots that I have learned. In the last couple years we've only done one complex per year. Typically around the 36 to 48 unit size. But this year we are 90% completed on a largest to date: 56 unit development in Bainbridge Georgia. It's been a really busy year and I haven't really had time to post any thing else on BP because as soon as we finished site work on our 56 units.. we purchased 4 other lots to build on in Dublin(80 units), Americus(80units) and Cairo Georgia(48units). We spent the last year applying for rezoning, variances, city/community meetings, back and forth with engineering etc and finally today everything is ready to build. 

The 56 unit apartment complex that we built this year we used passive House design where we used to buy six on the exterior walls with 6 inches of open cell spray foam insulation. As well as 14 inches in the roof to create an airtight thermal envelope. This theoretically this will help us reduce our HVAC needs by up to 70%. This is important because we include all utilities in our base rents. All electricity, water, gas, trash/sewer and high speed internet is included. The more we save the more we earn. We want to take the responsibility out of the residents hands to get all of this done since we think economies of scale wise it should be a top down effort. At the end of the day hopefully to put some more time and $$ back into the hands of our residents so they can spend it on their families, careers and giving back to the communities around them. 

There is so much I learned about developing. I mean the actual building part is what most think about but thats just one task in a sea of tasks and probably the most straight forward.. Other things from how to have banking relationships, what they ask and look for, what kind of draw headache do they have. How to properly present to a city/community meeting. What areas to purchase in and others to avoid. How much can we afford to pay for the land? Wow all four lots we bought are in federal opportunity zones.. What are those and how to take max advantage of that? 18 or 24 months construction loan? As projects get larger we need more cash. Mezzanine debt model or equity model? What rates to borrow the money at? We want to keep these for cashflow but damn we can sell at such a profit! What do we do now? We want 10,000 units but how can we get there if we have to keep selling existing to build more? Its just a hamster wheel... Prices of lumber are skyrocketing should be buy now and tie up cash for our upcoming devs, ocean freight pricing tripled should we continue ordering from overseas vendors? Our GC is stretched too thin and cant do all of our projects we have to find another shop but everyones so busy! List goes on....

For myself I am nostalgic sometimes and like to look back at photos and videos of my own journey. Sometimes I forget what things that have been done because i'm constantly looking at the future so this way I can look back and see the ideas that i had during that period of my life(right or wrong) and see how far I have come. I also have had lot of interest in the process for developments from my own circle of friends as well as people that have found us online. When I was getting started, there wasn't anyone that I could find online that could really answer my questions or had some videos about it. So i'll be documenting our journey here for anyone that comes after us there will be some bread crumbs. My first mentor said that success leaves clues if you look closely enough. Hopefully a good google or youtube search is all thats needed. Affordability is going to be a huge topic soon so the world needs a much help as it can get since Elon Musk isn't solving that one for us we have to do it ourselves... dang it!

I'll try and update more on BP blog style on the progress and answer any questions that can help anyone who's curious!

ok its 12:33am now and so time to wrap this up...

Crazy, I was looking for multifamily's and I saw your post for the sale of the cairo units.  I'm thinking, who the heck is this guy, so I clicked on your profile and I see that you posted this post literally 10 minutes ago LOL.  

-Considering you look pretty young, can I ask how you got started in the development game?

-how did you get the funds to begin such a large project? 

-In your opinion is it worth your time to do these developments? any regrets?

-why not keep them for cash flow?

Yes haha we sold those 24 units about 6 months ago and we still retain management! Great deal for us. But ya i started dwith SFR in college 2012 and amassed 7 of them by 2017 until i wanted 50 under one roof then i met some guys that were doing MF and approached them and they ended up liking me and invited me to join them on their next venture and today those two are still my partners. We have grown from 36 unit apartment in Moultrie Georgia to now five properties in five cities totaling over 250 units. Big things do have small beginnings. crazy only few years ago.

In the beginning the funds came from us. We put in $300,000 of our own equity in the first deal and finance the rest with a community bank. Then we refinanced our cash out plus a little bit more profit on top and put it into two more cities. Today since we're doing five cities at a time we had to take out outside investors through a mezzanine debt model as well as a equity model. Basically you're looking at waterfalls distributions that's a whole conversation in itself maybe google or youtube it :). But yeah in the beginning you're more than likely not going to be able to get that kind of investment you have to put your own money forward the first one is definitely the hardest after you get the product done and completed the money sort of just gravitates to you. 

The only regret I have is not doing this 10 years ago. Or maybe just coming out the womb building apartments. No the partnership is great I have really great partners and we make a really good team. A lot of going into business is doing it with people that make you better as a person and challenge you and push you. And I think that's what we did for each other. I wouldn't be here without them and they wouldn't learn any of my millennial tricks if it wasn't for me :) They are 10+ years older than me. 


well holding them current cash flow was the original goal. Until we found out how much cash it takes to hold deals. If you only want to build one then yes you don't really need more cash. But if you want to build to you need to pull your cash out the first one to do the second one. And then if you do more like four developments at the same time you need four times the initial capital. Then these projects start getting larger like 80 units each that's close to $1.6 million in capital per development. The first one remember we only put $300,000. 100 per person. There's no way the three of us can finance that all the way to the top we need some backing so we do need to sell some or find a partner investor who has the cash and that's what we did so now we are starting to keep them.

I’m glad you added the part where the partners “make you better as a person” I had a mentor for a short while. He had tons of money and offered me to partner with him to get my foot into the larger stuff right out of the gates. Unfortunately he has a not so great personality and I couldn’t see myself working with him for an indefinite amount of time. So I kindly rejected his offer.
So this leads me to ask- How do you find people like that to partner with to jumpstart growth like that? Meetups? Go knock on developers doors? 

 I don’t have 100k sitting around, so in order to get my feed wet I should start on multiplexes and sfr? 
I really appreciate your response. Lots of food for thought. 

Originally posted by @George Yu :

Hey guys my name is George and about a year ago I posted on BP in regards to a 36 unit development that we finished in Moultrie GA. We built it for around 1.5 million, post construction Refi appraisal came out to 2 million(~500k net) and today it has sold for 2.7 million(another ~700k net). Since the post over a year ago there's lots that I have learned. In the last couple years we've only done one complex per year. Typically around the 36 to 48 unit size. But this year we are 90% completed on a largest to date: 56 unit development in Bainbridge Georgia. It's been a really busy year and I haven't really had time to post any thing else on BP because as soon as we finished site work on our 56 units.. we purchased 4 other lots to build on in Dublin(80 units), Americus(80units) and Cairo Georgia(48units). We spent the last year applying for rezoning, variances, city/community meetings, back and forth with engineering etc and finally today everything is ready to build. 

The 56 unit apartment complex that we built this year we used passive House design where we used to buy six on the exterior walls with 6 inches of open cell spray foam insulation. As well as 14 inches in the roof to create an airtight thermal envelope. This theoretically this will help us reduce our HVAC needs by up to 70%. This is important because we include all utilities in our base rents. All electricity, water, gas, trash/sewer and high speed internet is included. The more we save the more we earn. We want to take the responsibility out of the residents hands to get all of this done since we think economies of scale wise it should be a top down effort. At the end of the day hopefully to put some more time and $$ back into the hands of our residents so they can spend it on their families, careers and giving back to the communities around them. 

There is so much I learned about developing. I mean the actual building part is what most think about but thats just one task in a sea of tasks and probably the most straight forward.. Other things from how to have banking relationships, what they ask and look for, what kind of draw headache do they have. How to properly present to a city/community meeting. What areas to purchase in and others to avoid. How much can we afford to pay for the land? Wow all four lots we bought are in federal opportunity zones.. What are those and how to take max advantage of that? 18 or 24 months construction loan? As projects get larger we need more cash. Mezzanine debt model or equity model? What rates to borrow the money at? We want to keep these for cashflow but damn we can sell at such a profit! What do we do now? We want 10,000 units but how can we get there if we have to keep selling existing to build more? Its just a hamster wheel... Prices of lumber are skyrocketing should be buy now and tie up cash for our upcoming devs, ocean freight pricing tripled should we continue ordering from overseas vendors? Our GC is stretched too thin and cant do all of our projects we have to find another shop but everyones so busy! List goes on....

For myself I am nostalgic sometimes and like to look back at photos and videos of my own journey. Sometimes I forget what things that have been done because i'm constantly looking at the future so this way I can look back and see the ideas that i had during that period of my life(right or wrong) and see how far I have come. I also have had lot of interest in the process for developments from my own circle of friends as well as people that have found us online. When I was getting started, there wasn't anyone that I could find online that could really answer my questions or had some videos about it. So i'll be documenting our journey here for anyone that comes after us there will be some bread crumbs. My first mentor said that success leaves clues if you look closely enough. Hopefully a good google or youtube search is all thats needed. Affordability is going to be a huge topic soon so the world needs a much help as it can get since Elon Musk isn't solving that one for us we have to do it ourselves... dang it!

I have started to upload some videos to Youtube under my handle: JustDoYu as start to document the journey. Dealing with all the ups and downs of this whole thang... 

I'll try and update more on BP blog style on the progress and answer any questions that can help anyone who's curious!

ok its 12:33am now and so time to wrap this up...

@Paul Han yeah you might have to do something that doesn't sit 100% right with you in the beginning but as long as you're learning something and can later take it with you personally I would do it. nothing lasts forever... the good times or the bad times. might as well use it as a stepup. 

Just networking and being genuinely curious about other people what they do. Your going have to weed out the bad from the good but thats with anything in life. 

Yes start with anything creative. educate yourself first then try owner financing, HELOCS, borrowing money friends and family, 

Thanks again for your answer. As I begin this journey I have found the biggest barriers to growth is not the money but the access to knowledge and the personal relationships to people who are willing to share their experiences and growth.  Anyways, not many people take their time to answer with as much insight as you did so I really appreciate it. 

It's out of necessity really. Theres a class of renters that is quickly being passed over and the number is growing. Building science is one of the ways to push against it!

Hi George,

It sounds like you have been quite busy. I am a developer also with a slightly different strategy. Currently I buy old SF in certain areas in the Tampa market and rezone them from SF to RM (multi-family) and build Town homes. My current project is a SF that just passed rezoning on a 150X100 lot. I re-platt them into 3 50X100 and put 2 Town homes on each lot. 1 SF = 6 Town homes. 

I also own 2 small multi-family properties. 1 has 22 units on 2.2 acres. I plan to develop it as the zoning allows for up to 82 units. Can I pick your brain?

A few questions about the 36 unit since that one is complete and you likely have data for.

  1. What was you total cost per door including land?
    What was the unit mix and square footage?
    What was the process like going from your construction loan lender...to refi lender?
    How much time did you have on the construction loan after final inspections and acquiring COs until 80% occupancy?
  2. How many floors and how did you frame them

Thanks 

@George Yu first congrats on the success. Often time I saw these amazing stories. You mentioned you build your units around $1.5M. Recently, I look at a beat down single for flip in San Francisco Bay Area, the quote i got was $1.5M to remodeled, not including the cost of buying the house which close to $1M. I just can't imagine building a 50+units only cost $1.5M. Is these costs depend on locations? Isn't the lumbers price more less the same across the country? Am I missing anything here? Thanks in advance for your answers

Very nice conversation here. I, also, find 2 other partners 1 year ago and we are finishing a remodel of 40 units. We will refi it after we got mostly rent it, and cash out a good money there

Next step would be to get into development, but is just such a big leap For all of us 3.

We have a good amount of capital, and good financial connections, but would still be very unsure on where to get started? Do I go ahead purchasing land right now, how can I change the zoning on it? Is it possible? Do I connect with the county first?

Land prices are super high, all prices are high right now. However I don’t want to wait till a dip, that never happens.

Anyways, I think I need to understand about zoning better and lock land and re zone it. After that, do I find a builder? Do they quote on $sqft? Is that really true, or will it go out of the window after 1 year into the project?

Marketing, management, and all after the units are ready we have lots of experience with. And financing it too. And we have the cash to ignite the process and know a lot about remodeling. I think we are just missing that gap.

Any resources, help, much appreciated.

Good history btw.

@Armando Payano first congratulations on your success and the accumulation of all of your investments. That's a good idea with the townhomes helping out with infill lots. Cities need more density for affordability and that's gonna be a huge help. You can put 82 units on 2 acres? That sounds quite high actually. Typically in Georgia all the cities that we are in the most we can get is about 20 per acre. That's with a rezoning and variance. Typically our for multi family here allows 16 per acre we have to fight for the additional four units.. i need to go to larger cities and get out of rural towns!

We work will local community banks so draws are a breeze. We don't contact them until we are ready. Nothing worse than looking unprepared to a banker..  Refi lender called us they lost on the construction loan they didn't want to miss out on the long term. 

We had 97% occupancy about two months after we had the CO. It's remained that way since. Would say 100% but there's typically a seasoning. I have about six months where are we I have quite a bit of turnover but we always have a long waiting list so it's never sitting empty for long.

      @Ed Zhao Thank you know that was my 36 unit that cost 1.69. It's been two years I didn't look at the numbers but after posting the pro forma from almost 2 1/2 years ago it's 1.69. for 36 one-bedroom units. They were small. 390 ft.². Really was just an experiment. This was built two years ago the article that I wrote on this forum is in regards to a 56 unit part of house apartment complex that we built this year but it was 4.7m. Lumber prices have increased but we have just been absorbing it since that was in the middle of our development. Yeah you should get out of California. I would stay out of that place as well as New York. Plenty of other good opportunities just not in your backyard. There's a lot of ridiculous things happening in those two places lol when you talk about a $1.5 million beat down I can't believe it from where I'm from... If you can make it in California and New York you can seriously make it anywhere lol

      @Hubert Chen yeah I guess I'm just from a small town in Georgia. I don't understand California prices. My cousin lives in the Bay Area and his house is over $1.6 million for what I would consider a piece of crap. I told him to sell that thing and invested into my apartments in Georgia. Then in five years he could buy three of those in California if he wanted to.... he has yet to do so

      @Arthur Neves I'm trying to see how to best answer your very complex question in a couple paragraphs. I mean this could really take one year of time to explain it in detail so I'll try to give you the high-level best I can.. First start small and experiment. Don't over pay for land ever. Find the city within two hours from where you live and look for land no more than 10,000 and acre on the city sewer water electric not in a flood plane.. Get it rezoned and a variance to pack out as many units as possible work with an architect to do so. If there is an existing survey or plat use that. Talk to a civil engineer and have them engineer the site. Ask anyone in the process if they can recommend a good GC that they have worked with you should be able to get some feedback. The land you should not purchase you should put it on a contract with the contingency that you were able to get a rezone and building permit and whatever else they will agree too. Talk to city manager, zoning, city officials about what you want to do have 3-D renderings and 2d floor plan and elevations ready to show. Make sure they agree with what you're going to do and give you their blessing. Once you get the building permit in hand have a community bank ready to go in a partner with a W-2 that is bankable with assets. Be ready to put down 20% equity yourself or have a private investor to cover that. I'm assuming you know how to run numbers make sure the numbers work. Talk to a local property manager to see what your units market rate would rent for and if there is demand and if they will manage it for you when it is completed. Don't let your GC get ahead on the drawls I'm sure you know that. Micromanage the **** out of him or her. Every day you're on the job site for as long as it takes. When the project is 80% finished start marketing it and get it filled up with pre rent. Typically we just collect a deposit that is fully refundable if they change their mind sometimes our projects go past what we initially say because the weather and some people can't wait that long. 

      Don't wait for the dip. What exactly will that do for you? You're here to learn the process and the dip won't make it any easier. Going where are you are treated best will make it easier for you. 

      @George Yu

      Its all about your team man. I have 20 years in the military and about to retire next year and start real estate investing in FL next year. (Doing lots of reading right now). The only thing I am certain I will miss is the few teams I was a part of that made me better and made me want to go into work. Its rare but sounds like you have one, stick with them. Good luck.

      @George Yu - You're the man!

      I was inspired by your original post!   This is exactly what we plan on doing in the neat future.   We've built out our construction arm to a point where we will be able to save a ton of money (and ultimately control a lot of construction related variables) by doing it with our own company.

      Are you using the ultra efficient, everything included in the rent model as way to offer "Affordable housing", or will you be targeting market rents?

      In terms of building sizes/layouts, what have you found to be the most economical?   Lots of 4-10 unit buildings, or one large all encompassing building?

      Originally posted by @George Yu :

      Hey guys my name is George and about a year ago I posted on BP in regards to a 36 unit development that we finished in Moultrie GA. We built it for around 1.5 million, post construction Refi appraisal came out to 2 million(~500k net) and today it has sold for 2.7 million(another ~700k net). Since the post over a year ago there's lots that I have learned. In the last couple years we've only done one complex per year. Typically around the 36 to 48 unit size. But this year we are 90% completed on a largest to date: 56 unit development in Bainbridge Georgia. It's been a really busy year and I haven't really had time to post any thing else on BP because as soon as we finished site work on our 56 units.. we purchased 4 other lots to build on in Dublin(80 units), Americus(80units) and Cairo Georgia(48units). We spent the last year applying for rezoning, variances, city/community meetings, back and forth with engineering etc and finally today everything is ready to build. 

      The 56 unit apartment complex that we built this year we used passive House design where we used to buy six on the exterior walls with 6 inches of open cell spray foam insulation. As well as 14 inches in the roof to create an airtight thermal envelope. This theoretically this will help us reduce our HVAC needs by up to 70%. This is important because we include all utilities in our base rents. All electricity, water, gas, trash/sewer and high speed internet is included. The more we save the more we earn. We want to take the responsibility out of the residents hands to get all of this done since we think economies of scale wise it should be a top down effort. At the end of the day hopefully to put some more time and $$ back into the hands of our residents so they can spend it on their families, careers and giving back to the communities around them. 

      There is so much I learned about developing. I mean the actual building part is what most think about but thats just one task in a sea of tasks and probably the most straight forward.. Other things from how to have banking relationships, what they ask and look for, what kind of draw headache do they have. How to properly present to a city/community meeting. What areas to purchase in and others to avoid. How much can we afford to pay for the land? Wow all four lots we bought are in federal opportunity zones.. What are those and how to take max advantage of that? 18 or 24 months construction loan? As projects get larger we need more cash. Mezzanine debt model or equity model? What rates to borrow the money at? We want to keep these for cashflow but damn we can sell at such a profit! What do we do now? We want 10,000 units but how can we get there if we have to keep selling existing to build more? Its just a hamster wheel... Prices of lumber are skyrocketing should be buy now and tie up cash for our upcoming devs, ocean freight pricing tripled should we continue ordering from overseas vendors? Our GC is stretched too thin and cant do all of our projects we have to find another shop but everyones so busy! List goes on....

      For myself I am nostalgic sometimes and like to look back at photos and videos of my own journey. Sometimes I forget what things that have been done because i'm constantly looking at the future so this way I can look back and see the ideas that i had during that period of my life(right or wrong) and see how far I have come. I also have had lot of interest in the process for developments from my own circle of friends as well as people that have found us online. When I was getting started, there wasn't anyone that I could find online that could really answer my questions or had some videos about it. So i'll be documenting our journey here for anyone that comes after us there will be some bread crumbs. My first mentor said that success leaves clues if you look closely enough. Hopefully a good google or youtube search is all thats needed. Affordability is going to be a huge topic soon so the world needs a much help as it can get since Elon Musk isn't solving that one for us we have to do it ourselves... dang it!

      I'll try and update more on BP blog style on the progress and answer any questions that can help anyone who's curious!

      ok its 12:33am now and so time to wrap this up...

       What amazes me is how little the land is costing 

      @George Yu

      I’m still starting out, finding partners growing my portfolio slowly… as a builder I know you just put thousands of dollars of value in a few sentences in strategy alone. I am just finishing a $3+mil custom home build and it took over 2yrs— it’s scary the inefficiency in that class. I love the idea of using modern building passive designs techniques and economies of scale together - technology is getting better and cheaper and labor is going up. I have a few people right now that I am looking to partner with to build apartments but I’m afraid everyone just isn’t on the same page. Wish you the best!