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

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

Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes

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...

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Paul HanPro Member
Member since 2021 · 14 posts · 19 votes
5y

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?

See this reply in the discussion

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  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    5y

    @Michael Ablan I think that’s a good question. I think it’s just one of the cultures that we have in the company. Cost savings and energy efficiencies should come from the top down. Not the bottom up. We should leverage our buying power to bring the cost of utilities and materials down instead of asking those at the bottom to bring those cars down for us. For example if you go out and get a Internet bill right now for your apartment more than likely it will be about $60 a month. Over 56 units that’s over $3400 for the whole apartment complex. We can negotiate with The local Internet provider for a bundled package for all buildings for much less than that. Same thing with the other utilities. 

    Building a breezeway instead of a interior Corridor is the way to go. Build as many as you can to get the economies of scale. We are still in rule areas so I can’t speak on what’s best in a city. Yes we only charge market rate rents non-subsidize. I’ve been looking a lot into modular and different building methods especially since lumber prices have been skyrocketing recently. It’s always interest me it doesn’t quite fit our model just yet but I’m going to make a way to make it fit in the near future

  • Investor · Phoenix, AZ · Member since 2015 · 346 posts · 170 votes
    5y

    @Hubert Chen

    Opportunity zones

  • Investor · Phoenix, AZ · Member since 2015 · 346 posts · 170 votes
    5y

    @Ed Zhao

    He did mentioned he was buying lots of land in opportunity zones.

  • Investor · Phoenix, AZ · Member since 2015 · 346 posts · 170 votes
    5y

    @Michael Plante

    Opportunity zones

  • Thomasville, GA · Member since 2018 · 17 posts · 4 votes
    5y

    Very interested and impressed with your growth as a developer in real estate space @ George Yu

    I have colleagues that recently sold another multifamily in moultrie Ga as well

    i live in next town over (Thomasville) and have been looking to do more in this niche

    love to connect with you

    Michael M

    would love to connect

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    5y

    @Johnny Kim yes when I have some extra cash on the side this is my next goal. Building needs to change. We’ve been using stick frame construction for too long and there are many other better ways to build that don’t quite yet have the economies of scale but I would like to take a risk on that. Right now all the extra cash that we have is going towards building our future developments. It’s a very cash intensive business so I would estimate in the next 12 to 24 months I will have extra cash on the side that I will be ready to deploy into an idea like this. I have seen some of the modular stuff not super impressed with it it may have to be another ground up development idea

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    5y

    @Joseph Hummel well thanks. I love value. Receiving and giving. Interesting that you bring that up. I would say try to find a way to do it yourself and commit to it. Eventually the universe will conspire to put the right people and opportunities in front of you and put you on the fast track. I have found that to be the case in my journey. I took a risk myself and once I started gaining traction I met someone or was presented some thing that completely changed my life. Good luck to you don’t give up

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    5y

    @Michael Magbalon oh yeah which one was it? Very familiar with Moultrie. Yes it’s time to sell profits are too big not to be taken right now LOL. Sure shoot me a message in my inbox and we will get connected I will be down there next week. You should come to Cairo and see the next development that we’re already broken ground on it’s only 30 minutes from you. 

  • Investor · New York City, NY · Member since 2015 · 388 posts · 563 votes
    5y

    @George Y. - congrats on building to Passive House standards. How did you address ventilation? Did you put an energy-recovery ventilation unit in each apartment? Or one per floor? 

    Was your foundation built with a high R-value as well?

    In general- did your GCs have any trouble meeting passive house standards? Thanks and congratulations again, it's great to hear from someone building to a higher standard.

  • Member since 2021 · 4 posts · 2 votes
    5y

    @George Yu wow! Congratulations! My husband and I owe 8 multi family homes and we’re ready to get into the development side of things. Any advice where to get the best bang for your buck on lots?

  • Realtor · Lake Charles, LA · Member since 2019 · 39 posts · 25 votes
    5y

    @George Yu this is very insightful George thank you!

  • Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    5y

    Great idea. The price of MFH are so high that is probably more lucrative than building single family homes. Or buying MFH.

  • Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Carlos Gonzalez:

    @Hubert Chen

    Opportunity zones

    How does that lower the price if land?

  • Rental Property Investor · Chalfont, PA · Member since 2021 · 190 posts · 90 votes
    5y

    @George Yu

    So many questions… best of luck

  • Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    5y
    Originally posted by @George Y.:

    @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.

         AWH!  Now that explains it!  Your apartments are less than 400 square feet each.  I assumed that being in Georgia, where land is not that expensive, that they would be more in the 1000 square foot range!  Those are more like motel rooms.  Less than 20 feet by 20 feet! 

      1. Investor · Chatham NJ · Member since 2021 · 55 posts · 29 votes
        5y

        Hi George! This is an awesome post. This is really inspiring to see how scale can occur so naturally within real estate

      2. Investor · Member since 2021 · 131 posts · 100 votes
        5y

        @lynnette 

        @Lynnette E.  That was exactly what I was thinking.  As I was reading the thread, I was wondering why no one else hadn't mentioned this earlier.  It sounds to me more like a dorm room than an apartment.

        Don't get me wrong, from what @George Y. has posted, it is a rather remarkable success story.  When I realized the size of the apartments though, IMHO this would only be feasible in select situations where people would be willing to live in much tighter quarters.   Most people would not consider anything less than a 500 sqft. apartment in the areas I have invested in.

        That being said, Kudos to George for his success and journey!

        Dave

      3. Chas GunkelPro Member
        Real Estate Professional · New York City, NY · Member since 2015 · 4 posts · 2 votes
        5y

        Thank you George Yu!
        I am just starting my large multifamily journey, and I have learned a lot from this post.
        Question, if you had 770K that you have to do a 1031 with, what would you do?
        Cheers,
        Charlie

      4. Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
        5y
        Originally posted by @David C.:

        @lynnette 

        @Lynnette E.  That was exactly what I was thinking.  As I was reading the thread, I was wondering why no one else hadn't mentioned this earlier.  It sounds to me more like a dorm room than an apartment.

        Don't get me wrong, from what @George Y. has posted, it is a rather remarkable success story.  When I realized the size of the apartments though, IMHO this would only be feasible in select situations where people would be willing to live in much tighter quarters.   Most people would not consider anything less than a 500 sqft. apartment in the areas I have invested in.

        That being said, Kudos to George for his success and journey!

        Dave

        What he has done, and the ability to build then sell at a profit is great!  I am not in any way putting down what he is doing.  Would probably be  a major solution to some of the homeless issues California is dealing with under their court order.

        I was trying to figure out the numbers.  I easily spent more per unit in rehabbing apartments than he does in building them.  But my apartments are 800 to 1000 square foot for 1 -2 bedroom units.

        And I was trying to figure out who would want to buy apartments with the landlord paying for the utilities.  Most investors want to pass on those types of expenses whenever possible without liability.   However, it makes sense if they are more for student housing, disabled, elderly, or homeless, financially challenged people who would have difficulty paying the deposits to turn on utilities.  Plus with such small units they won't be packing in 6 family members, running up the utility usage.

      5. Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
        5y

        @Michael Gansberg hey man thanks we used a HRV system one per four units. The foundation we just used I forgot how many mill Poly and some foam. Yes the GC and subs needed constant attention but after the first building they understood. Tape up all the seams airtight barrier LOL anything that doesn’t catch it the spray foam would.

      6. Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
        5y

        @Doris Moreno I mean affordable market rate housing is needed everywhere. Go somewhere that fits your budget. Find out how much do you need to rent these units for to be competitive and affordable. Then find out the max you can pay for that land. That price per acre will tell you where you have to go to build. The way you’ll know is wherever you find that price LOL you may have to go a little far out of your city good luck! Don’t be afraid to venture out

      7. Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
        5y

        @Lynnette E. No we only build one or two bedrooms. That is our niche. We aren’t trying to solve the 3 to 4 bedroom for families’ problem at least not yet.  there’s no way to make these units affordable somethings got to give. We don’t wait for LIHTC tax credits FROM The govt. The government is slow and if we build anything on top of their program we would be even slower. Plus we don’t believe that the government needs to be involved in this. This is a problem capitalism can solve on its own. Besides paying less for the land and not giving people anything more than what they need that’s all we got. If you have any suggestions I’m all ears!  if you travel anywhere around the world you’ll realize that we are one of the most wasteful countries in the world. We have so much excess we don’t even realize it. Go to Hong Kong and people are living in cages. I’m not suggesting we do that but there’s a lot we can improve from there needing a 1000-2000 square-foot house for a family of three

      8. Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
        5y

        @David Cozzi thanks yeah the first ones we built were 400 ft.² the 56 unit one we built if you look at the numbers those are starting from 500 ft.² up to 600 ft.² for the one bedrooms and the two bedrooms are about 800 ft.² on average in the three bedrooms are over 1000 ft.².  we are not in the business of giving people anything that they want. We’re giving people what they need. There’s a certain class of renters out there that have no choice and the only things that are available to them or something that are built in the 60s with poor insulation and sometimes their utility bills are more expensive than their rent. If you go on the YouTube channel you can actually see the stuff we put in it. It’s really nice stuff we put granite countertops stainless steel appliances it’s not what you’re thinking as dorm per se… thanks! I import as much as I can from China which makes everything more affordable as well. 

      9. Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
        5y

        @Chas Gunkel find someone like me that would take you on and invest! If it’s capital gains find a federal opportunity fund and take advantage of that. Contact any qualified federal opportunity fund brokerages and they can put you in touch with potential development deals that fit your criteria.

      10. Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
        5y

        @Lynnette E. Thanks for the explanation on this. Yeah there’s no one-size-fits-all answer for every situation out there. Unfortunately.  we know where we are going in the problems we are solving. More importantly we know the ones that we aren’t solving and we are OK with that. I hope this post helps people realize the problem that’s ever pending as an opportunity to help the growing demand for affordable housing and able to think of other creative solutions to help my solution is just one of probably hundreds. We need everyone working on different parts of it and with different solutions. Also there’s plenty of money to be made so if that’s your motivation there’s nothing wrong with that. Two birds with one stone help people and make money!

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