Multi-family New Construction BRRRR?

Question

Hey guys, I’m looking to help my family develop a piece of land we’ve had for sale for a couple years and hasn’t sold in Anchorage, Alaska. I’d like to out a triplex or a 4plex on it to keep as a rental long term.

Land value is around 9,000sqft. Worth around $76,000.

We will have around a $250k heloc if needed, $100k in cash, and pretty much own the land outright ($76k in equity). I have a strong income and should be able to qualify for a construction loan as well.

Issues currently:

-The piece of land doesn’t have utilities (so we’d need to bring in utilities / put in well and septic).

-I don’t know much about new construction, only have experience with my own 4plex I got a couple years ago.

1. where should I start?

2. Are there other options I could consider? What would be the best investment move considering the assets we have available?

Thanks in advance!

Chidiebere Iwuoha Jr · Answer

This is super helpful. Thanks a ton will get on these steps asap.I think you may be right about the area might not being able to support new construction pricing that’s why it may have not sold already (land is already very limited here).

Mike Wood · Answer

@Chidiebere Iwuoha Jr  First, find out what the land will allow to be built.  Most cities have zoning, and will only allow you to build what is currently zoned for.  I will say that building a four (4) plex on 9000ft2 of land my get tight with the building and parking, but not so much if you build two stories.

Second, get an idea of what you want (size and arrangements of units) i.e. 2/1, 1000ft2 units or 3/2, 1500ft2 units.  Then talk to local builders for some ballpark prices.  I gotta think that construction costs in AK are up there, and $350k wont build much (maybe a duplex).

Third, look around the area and see if similar mutlifamily units are selling for close to the costs or more (compare on a $/ft2 basis).  If you have struggled to sell the land, its likely the area can not support new construction pricing (i.e. existing houses are selling for way under new construction costs)

Finally, with ballpark prices, calculate out if the property will make financial sense, using current market rents for similar units, your expenses and your debt service (assuming the final property is financed).   This will tell you if it make sense to start getting serious with building plans, contractors, lenders, etc.

Dennis Muno · Answer

I would recommend you contact a mortgage broker near you. They will be able to, with your financing information you have provide here, be able to shop with multiple lenders to help you find the best financing that will allow you to develop the land and put up the property

Timothy Chi · Answer

@Keenan Fitzpatrick - I believe you mentioned you had experience w/ building. Is this something you might be able to help him out with?