Building New Residential Multi-Family in Chicago

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Building New Residential Multi-Family in Chicago

Matt B.
Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes

Hello, my name is Matt.This is my first time posting on this site. I am new to real estate investing, I know more about the construction side. I see many people buying multi-family buildings for renting out. I was wondering has anyone bought land and built there own building on this website. I am going to be starting building a 3 Story 6 unit residential building in Chicago, I am just waiting on the permits.  I just wanted to introduce my self to the website and to see what other peoples think on building a residential building instead of buying one.

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Dorothy Wulf
Chicago, IL · Member since 2016 · 165 posts · 49 votes
9y

Clients love new. New roof, new windows, new mechanicals etc. Taxes are in arrears so they can purchase higher with lower taxes and qualify easier.  It's the zoning, waiting for permits and waiting for contractors to show up is why you see buyers flocking to existing builds. Either way you find it to be profitable I would do it.

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    9y

    @Matt B. - I have not done it, but I do all my business in Chicago with apartment buildings.  As long as the zoning allows for it and the numbers work either as a hold or flip so that it is profitable for you I don't see why not! 

    @Mark Ainley have you done new construction?

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  • Jaclyn McClellan
    Real Estate Agent · Chicago, IL · Member since 2016 · 176 posts · 73 votes
    9y
    I think building could be great if it's in a good area. Every place I've followed on the north side that gets built rents out/sells really quickly. What area are you building in?
    0Reply
  • Chris Titcomb
    Real Estate Attorney · Chicago, IL · Member since 2014 · 89 posts · 66 votes
    9y

    @Matt B., I have clients that would rather build new and I have clients that only buy existing buildings.  My developer clients like to build new because they are able to manage risk differently.  They know what their construction costs will be up front, and, after construction the risk of mechanical-related defects are limited (assuming they hold the asset).  Existing structures, on the other hand, may have latent defects, which could be missed by an inspection.  But -- and this is a big consideration -- when you're buying an existing building, you (hopefully) will have an income stream from day 1.

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  • Ashour Rehana
    Real Estate Broker · Chicago, IL · Member since 2016 · 57 posts · 23 votes
    9y
    Matt Bachula I know two investors who do just that. They build multi unit properties and rent them out at a premium. They purchase in the Edgebrook and Jeff Park areas and have had much success. However, they have the builds down to a science. At any rate, I personally don't see anything wrong with building new or buying and rehabbing. The biggest problem I see with both building new and rehabbing is lack of a good plan and budget, this makes or breaks the deal. Another think to consider is what your ultimate plan is...if you want to flip the property, then rehab a multi unit, there'll be more profit. (If it's done right)
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  • Dorothy Wulf
    Chicago, IL · Member since 2016 · 165 posts · 49 votes
    9y

    Clients love new. New roof, new windows, new mechanicals etc. Taxes are in arrears so they can purchase higher with lower taxes and qualify easier.  It's the zoning, waiting for permits and waiting for contractors to show up is why you see buyers flocking to existing builds. Either way you find it to be profitable I would do it.

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  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    9y

    Thanks everyone for the responses.

    @Brie Schmidt - Yeah the numbers look good for a hold. The reason is we will be doing the masonry work by our-self, so will be able to save a lot on the cost.  All the other jobs are by subs we know a long time. So we should be able to build the building for 30-40 percent less then what is should be worth.

    @Jaclyn McClellan- Yes it on the north side. Its on the border of Portage Park and Cragin.

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  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    9y

    @Chris Titcomb The only reason why we deiced to build instead of buy is because we can do a lot of the work ourselves, so i think we should be able to do if for a price that we would could not buy a building for but that's if everything goes as planned.

    @Dorothy Wulf I agree, with a new building we shouldn't have too many repairs for long time. The zoning change went pretty fast but we been waiting on the permits for a while but they should be done soon. We will be the General Contractor and know most of the contractors for long time, so i hope there shouldn't be a problem. I more worried on how fast we can find tenants. 

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  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    9y

    @Ashour Rehana I think we got a good plan and budget. Our plan would be to hold the property and pay off the loan as fast as possible.

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  • Dorothy Wulf
    Chicago, IL · Member since 2016 · 165 posts · 49 votes
    9y

    @Matt B. Depending on completion of the project I would recommend advertising sooner then later. Have you run the numbers for your rental units yet?

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  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    9y

    @Dorothy Wulf Yes i was thinking about advertising 2-3 months before completion. What numbers do you mean specifically?

    0Reply
  • Dorothy Wulf
    Chicago, IL · Member since 2016 · 165 posts · 49 votes
    9y

    The rents you are going to charge?

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  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    9y

    I was thinking at the  minimum $1500 but probably more then that. They are 3 Beds and 2 Baths

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  • Mark AinleyBusiness Member
    Property Manager · Roselle, IL (Chicago Suburb) · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    @Matt B.  @Brie Schmidt

    Great to meet you Matt and welcome to the site.  We are not new cos guys.  

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  • John Weidner
    Chicago, IL · Member since 2014 · 710 posts · 200 votes
    9y

    See more of the 6-8 units going new. 

    I don't think you could build a new 3 unit for what an existing one goes for.  Cheaper to buy and gut rehab it.  

    0Reply
  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    9y

    I am building a 6 unit.

    0Reply
  • Robert Liu
    Chicago, IL · Member since 2016 · 4 posts · 0 votes
    9y

    I was seriously looking to do the same thing but the land supply with appropriate zoning is very very low in the city now. 

    0Reply
  • Elbert D.
    Real Estate Entrepreneur / Investor · Chicago, IL · Member since 2016 · 688 posts · 367 votes
    9y
    I have heard about the zoning and permit issues some people have come across. It's unfortunate it's hard to make deals and get goals done within real estate in Chicago recently. But I do have some information about land located in Oakbrook if anyone would like to know about it PM me
    0Reply
  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    9y

    Zoning took me about 3 months. It depends on your alderman, but it shouldn't be a problem because a new development benfits the community. The permits in Chicago take a long time. About 4 months now.

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  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    8y

    We recently finished the project,  I uploaded some of the pictures on how it came out. If you want to see progress pictures from start to finish go to

    https://www.caseymasonry.com/3006-n-central

    2Reply
  • Wes Eaves
    Houston, TX · Member since 2018 · 3 posts · 3 votes
    8y

    @Matt B. I'm impressed.  I've been kicking around a similar idea.  I gather from the beginning of this thread that you probably have a fair amount of new construction experience.  Can I ask how you went about the financing?  Did you pay cash for everything, or did you have investors or loans, or some combination?  Also, do you mind if I ask what your total cost to complete the project was?

    Thanks,

    Wes

    1Reply
  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    8y

    @Wes Eaves Thanks, we done many new construction masonry projects for clients but this was our first project that we were the owners, no pervious flips.  Financing through a small bank, money down is about 20-25 percent of total cost. In this case we owned the land before so we had to put way less down. Our total cost would be different then anyones. We subbed out plumbing, hvac, electric. The rest we were able to do ourself with our workers. That drastically reduced cost. I mean if you were to just hire a GC I don't think you could even break even on this project.  Thats why no one builds in these areas, most new constrsution condos are built in areas where they can sell for minimum 450k but closer to 550k. But land cost so much there that you need so much more capital. We were able to do this project because we bought the lot at really great price and used our selves to build to achieve the numbers did. If you have any questions please dm.

    1Reply
  • Chris Youssi
    Rental Property Investor · Caledonia, IL · Member since 2015 · 290 posts · 213 votes
    8y

    Curious how many SF/ unit and what did you end up renting the units for? Impressive looking prop congrats!

    0Reply
  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    6y

    The units were 1500 sf. We end up selling them for 250k. Thanks

    0Reply
  • Matt B.
    OP
    Developer · Chicago, IL · Member since 2016 · 16 posts · 5 votes
    6y

    Hello, I would like to share our current project at 2309 Belmont. I attached a couple of pictures. We have the penthouse available a 630k(Link) and the commercial unit at 130k(Link). If anyone has questions, please let me know. 

    0Reply
  • Ricky Bass
    Magnolia , TX · Member since 2015 · 44 posts · 13 votes
    6y

    @Matt B. Well done! Why did you decide to sell the 6 plex? And $250,000 seems real cheap! Did the go fast? To one buyer? I see where you are a Masonary contractor and GCed the project. Still curious what your cost were? Do most builders build all block or stick frame?

    Thanks

    Again well done

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