I bought an existing 3 unit property in Cleveland OH along with the empty lot adjacent to it which I'm looking to build another 3 unit, 1000 sf per unit multifamily on. The properties are located in the neighborhood of Tremont and I wanted to see if anyone had advice on what the $ per square foot budget should be for this area? I want to attract high quality tenants so I'm thinking finishes a little on the higher end, but not so far as to surpass what will contribute to increased rent.
I think I know the property you bought, if it was on the MLS. Watch the driveway issues since if I remember correctly the garage faces the property line.
If I had control of a lot in Tremont, I would spec build a market-rate contemporary home with an exit price point of $300-350,000. With "modern" open designs and stainless/concrete finishes, building costs can be under $100/square foot. I've heard of the big contractors getting it down to about $70. Take a look at the comps--there's a great set of them in Tremont.
I don't think you'd be able to crack 10% cap on a new build even while asking for premium rents (1500+/unit). The older properties make better rental units since they're much cheaper (<150k). I'd say your money is better spent on a spec build.
Spec building in Cleveland is really exciting. There's a 15-year tax abatement, and demand is really high!
I should mention to be aware that many people pay an extra 100k+ for the city skyline view on the eastern bluff. So be aware of that when evaluating comps.
Thanks for your input Christian, this property is actually on W 6th which looks more like an alley than a street. I don't think there would be a huge demand for a spec build on this particular street at this time.
How much of the build are you doing in-house vs. subcontracting?
There are a few small things you can do that when added up can save you some decent cash if you have in house laborers. I've been able to reduce subcontractor scopes significantly and drive specs below $70 for one off construction (300k townhouses to give an idea of finish level).
A willingness to make big pallet purchases on material well in advance of build can help as well, liquidation sales , auctions, and Craig's List are your friends here. Shingles, windows, tile, etc.. can be purchased at significantly less than supply house pricing.
Alot of the cost can be reduced by having good resources. Having sub-contractors who will give you a fair price with quality work is a plus. Search craigslist for deals everyday. Check with local suppliers for discounted materials. (You can be surprised what you can find sometimes).
If you able to do some of the work in-house, this can save lots of money. But, make sure its something you know alot about, because if you do not, it can cost you lots of money if the work has to be redone.
On average, for a high-end building, expect costs to be around $100 per square foot. It can be less or more depending on deals and going rates in your area.
I would love to get into development! ... Specifically building single family homes in gated communities!
Does anyone know where I can learn more about it?
Hey Rob, any updates on how this went? I'm looking to get into house hacking in Tremont and am considering rehab or new construction. Any guidance is appreciated.
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