This is my first time posting. Please excuse the long post.
I am an architect in Toronto, with over 10 years experience in the design and construction of high-rise residential buildings. I am working towards transitioning from architect to developer. I am trying to get my first development in motion.
A friend of mine is looking to sell a 14,000 sf site in downtown Toronto. I have reviewed the zoning by-laws and have determined that the site can hold a 4 storey commercial/residential building. Of course, there is potential to rezone the site for more density.
Over the last couple of years, I have been developing various plans and construction details for prefabricated micro units. Market research has showed me that micro units sell very well here. I have talked to a few prefab builders in the area and they have given me estimates that could save upwards to 20% on overall costs. Most of the cost saving appear to be related to time saved and thus reduced interest payments. I have seen some great examples of prefab micro units in New York and San Fran and would like to put together a similar type of development.
I have taken the plans that I have developed, and applied them to my friends property. The goal would be to build a wood-framed, prefabricated structure with mostly micro units.
Here are the stats that I have come up with:
61 residential units (mostly micro units under 350sf, with small percentage of 2bd and 3bd as well),
17 at grade parking spaces
Here are the rough project costs. Keep in mind that this is the first pro-forma that I've created and is probably quite a bit off the mark:
TOTAL HARD COSTS
Ground Floor – 13,736 ft2 x $210/ft2 = $2,884,560
Second to Fourth Floors – 30,849 ft2 x $135/ft2 = $4,164,615
Sub Total - $7,049,175.00
10% Contingency - $704,917.00
Total Hard Costs - $7,754,092.00
ESTIMATED TOTAL PROJECT COST FOR STICK-BUILT OPTION
Land cost - $5,000,000
Soft costs - $ 775,409.00 - ($17.39 per square foot)
Hard costs - $7,754,092.00 ($173.95 per square foot)
TOTAL PROJECT COST FOR STICK-BUILT (INCLUDING LAND) - $ 13,529,501.000
MODULAR SAVES APPROXIMATELY 20% ON OVERALL COST.
TOTAL PROJECT COST FOR MODULAR (INCLUDING LAND) - $ 11,829,501.000
Total saleable area = 29,000sf
Total value of units + retail space = 29,000sf x $550 per square foot = $15,950,000
Total potential profit = $15,950,000 - $11,829,501 = $4,120,499.00
I would like to know if I am way off the mark, or close with my estimates. The price per square footage for construction were taken from our local price index for wood framed construction. The 20% cost savings would obviously vary.
I would also like some advice on how to move forward in attracting investors/partners to make this development work. The numbers seem good to me, but I simply don't have the experience to know for sure.
Any advice would be greatly appreciated.
I just skimmed your numbers nothing of value to add there anyway) and am curious about the planning/permitting process in Toronto.... Is a new housing development with 17 parking spaces generally acceptable? I only ask because I know that it would not be in my area.
The parking requirements vary depending on which part of the city you're in. I have designed a number of high-rise buildings in this area and because it's so close to the downtown core, and is highly accessible via public transit, the general parking ratio that we use is roughly .3 cars per unit.
One aspect that I didn't mention in my original post is that I would like to market this development as affordable housing. If that works out, I may be able to reduce the parking requirements even further (and also reduce development and permit fees).
What vehicle do you plan to use for the affordable housing, if any for subsidy? ( If it's anything like the states, your plan then has to conform to the laws of each subsidiary that you use.
I'm not entirely sure yet about the subsidiary corporation that would be used. The city of Toronto has recently announced their desire to partner with private developers in an effort to build on the number of affordable housing units required to meet the current demand. I don't yet what that means for my plans
Seems a little high for a pre-fab. Are these Canadian $? Are you sure 20% applies to soft costs also? 5M for a 14,000 sf seems really, really high. In LA, nobody pays 550/sf for 350sf, they tend to be much cheaper. And affordable housing tends to attract buyers that are in-between mid-low class. Good luck though.
yes, there are discounts on the soft costs because there are cost savings on the construction loan due to the expedited construction process. 5m is actually pretty low in Toronto for this size of a property. The market is expensive here. $550/sf is a pretty conservative number. I'm working on projects that are selling between $750-$1100 per sf. $550 per sf is the average number for all of Toronto so I used that to be safe. Yes, I'm aware that affordable housing is geared towards low-mid income. There are 100,000 people on the affordable housing waiting list and the city is waiving major fees to entice developers to build more affordable housing.
@Jeff C. Great sounding project and love your enthusiasm. Here is my input:
- need to add development charges, they are currently $20K+ per unit
- need to account for sales/marketing expenses and commissions
- cost for a sales centre?
- construction budget may be low, depending on how tight the site is and accessibility. It could be over $200/sf depending on these conditions.
Still would be a profitable project. The price of the land does seem extremely high though, unless it is smack dab in the middle of downtown. The best place to get construction pricing is from the horses mouth. If you are an architect, you should connect with one of the contractors building one of your designs and get their input.
Hope that helps.
Thanks Chad. Great points.
The construction pricing is for wood frame assembly which is why it's on the lower side. I got this price from a local prefab wood-frame builder.
The site is located right in the heart of the city which is why it is so expensive. Hoping to work out a better price though. Keep in mind that single family houses sell for way over 1 million in this city.
I appreciate your input.
@Jeff C. How's this project going?
I would echo Chad's remark in that you need to make sure development charges are taken into account in your soft costs. They charge per unit, so you may end up with a higher soft cost when you go with smaller units.
As for the affordable housing, it's almost a joke. Toronto (and most of Ontario) seems to consider it affordable housing when the sale price is under a certain amount. They don't care that it is expensive per sqft, only that the sale price is under a set amount. At under $200,000, these would definitely be considered affordable housing in Toronto. You don't need a subsidiary corporation to do this.
I would also check on the numbers for the sale price psf. You say $550 is average for Toronto, but I would want to get a more specific sale price per square foot for the exact location you are in. I'm sure @Claude Boiron can help you if you need it.
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