Lifecycle of a CA Multi-Family Development Deal

Lifecycle of a CA Multi-Family Development Deal

Real Estate Developer · Long Beach, CA · Member since 2017 · 251 posts · 359 votes

Hi Everyone

After reading through many excellent posts, include the "Diary of a New Construction Project" by @J Scott and @Joshua Dorkin, I thought I might add our voice here on BP. I am proposing to track the entire life cycle of an urban infill 4-unit rental housing development project in my hometown of Long Beach, CA. My proposal is to create weekly posts that cover a development project from beginning to end, and to give explanations about what and why we do things certain ways in this project, as well as, the logic behind our decisions. We will share site selection, initial underwriting/proforma analysis, design development, permitting, construction/build out, lease up, and (for this project) final sale. 

First, an introduction. My name is Scott Choppin. I have been married to my college sweetheart Rebecca for 17 year (together for 23) and we have three kids 15, 13, and 9 years old.

The purpose for this series of posts, is to walk everyone through the development process, demonstrating the details and life cycle of a development project. I have had the great benefit of many very savvy teachers, and would like to give the gift of passing on knowledge to others. As well, my purposes include building my own networks of help (tactical, transactional, and professional) to learn, raise more capital, and find more great projects to work on. This is, as you all know (or you do now), the lifeblood of all developers.

Finally, out of respect to my partners in this project, some details and proprietary information will stay private and so you may see redactions from time to time. As well, I will try to answer questions, but must limit cost in regards to time, so may be not be able to answer all questions. My goal, is simply to pass on knowledge, be an offer of help, and facilitate new folks in my network. So here goes....Sláinte.

Project Basics:

City: Long Beach, CA

Unit Count: 4 units, rental housing, to be sold upon completion and lease up.

Construction Type: Type V, 1 hour, with sprinklers. 

Type V (pronounced Type 5) is a reference for wood framed construction that most of you are familiar with, with "1 hour" referencing the fire rating between occupancy areas (say between a garage, or other units) where extra drywall is added in the walls between these areas (there's more to it than that, but keeping it simple). The other types are Type I, II, III, IIIa, etc. These would be various forms of concrete, steel, wood and steel mixed. "Sprinklers" means what is says, all units and garages will have residential grade sprinkler systems installed (residential sprinklers normally have plastic or PVC pipes versus steel that you see in commercial applications).

Construction style: 3-story on grade town home, direct access ground floor garage. 

"On grade" is the typical construction methodology that you are all used to where forms are built for the slab and poured onto the graded dirt pad, this is in contrast to "podium" where the cars park underneath in a concrete garage, and another type is high rise construction. "Town home" describes a type of unit, where the living space is on multiple floors, with the same tenant on all floors. Versus stacked flats, like typical apartment units, where different tenants live above and below each other. Garages are the bottom floor of the town home and are direct access to each unit.

Unit Type: Multiple bedrooms rented to families.

Some maps and then that'll be it for today. Next time, site selection including site photos and discussion about zoning. 

30Reply
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Most Popular Reply

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y

@Scott Choppin  After reading this unbelievably accurate and comprehensive post about developing from ground up.. and there are still those that want to do it?   LOL...  

I think for most starting out financing will be their biggest stumbling block if they have zero track record.  Along with sufficient working capital and equity requirements.

Keep up the great and detailed post that is most kind of you to take the time... !!!!!

See this reply in the discussion

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  • Rental Property Investor · Sacramento, CA · Member since 2019 · 7 posts · 0 votes
    7y

    @Scott Choppin I just found this thread this morning and want to thank you for the content and time you put into it! Wow, I've had an infill idea for a year and just felt overwhelmed by the scope of these types of projects, but the way you laid it out seems actionable. 

    Just wondering if it would make sense to get a rendering or hire an architect for a basic overview of a project where the land is not in contract yet. My thought is that this would help with funding, and potential buyers. 

  • Real Estate Developer · Long Beach, CA · Member since 2017 · 251 posts · 359 votes
    7y

    Here's the next entry in our series of this lifecycle thread - Final Grading/Hardscape/Landscape - installation, layout, etc. 

    You'll find it on the big video place....

    Post question as you have them. Just a few more videos remaining.

    ~ Scott

  • Real Estate Developer · Long Beach, CA · Member since 2017 · 251 posts · 359 votes
    7y

    @Ashley Mack

    I'll get you a response later this week. 


    Thanks!

  • Real Estate Developer · Long Beach, CA · Member since 2017 · 251 posts · 359 votes
    7y
    Originally posted by @Ashley Mack:

    @Scott Choppin I just found this thread this morning and want to thank you for the content and time you put into it! Wow, I've had an infill idea for a year and just felt overwhelmed by the scope of these types of projects, but the way you laid it out seems actionable. 

    Just wondering if it would make sense to get a rendering or hire an architect for a basic overview of a project where the land is not in contract yet. My thought is that this would help with funding, and potential buyers. 

    Hi Ashley, nice to meet you here on BP. 

    Your question is an important one for the beginning developer. How to get the most info needed for your decision making on a deal, yet not spend/lose significant amounts of money before you even have the deal.  

    First, know what the market wants and why. 

    This means that you want to design and build a product that fits the market, both renters of rental units, and the end buyers of your apartment projects if you are selling when complete assuming you will build and sell the units or the project. Do buyers love 2 bedroom rental units in your market? Don't design a project with a bunch of studios, etc. Do renters in a specific demographic love your town, but only want/can afford a certain whole dollar rental payment? Don't build something that's too expensive. You don't want to build a project or unit types that no one wants, and you get stuck. Now, if you want to build the units and hold them, you have more flexibility for what you think is right in the long term. But, you still want to build a coherent, feasible project for capital and lenders to be able to understand your offer. 

    Second, as a new developer, you won't yet be able to look at a project and underwrite the design yourself. What I mean by underwrite design I'll give my own example. For our company, we only develop a specific type of townhouse style rental housing, and we know that these units layout at around 1,700 s.f. of land area per unit, or about 25 dwelling units per acre. So I can take a one acre flat square site and know generally we can fit 25 units on it. That's all we do upfront, we find the land opportunity, do some quick math (1 acre = 25 units) and run a model on those numbers. We also do light research on rents in the micro market the land is located in (although we generally know the rents from other recent projects). We know our build costs cold, we have historics on development impact fees, and get guidance from property managers on operating expenses, although we know those from historics also.

    So you should be saying about know: "I don't know how to do any of this", and that's normal. Now here's where we'll try to open up a new space of possibility for your thinking: there is really no way to learn all of this (and I just touched on the surface above) real estate development knowledge, and execute on projects in real time. You will lose money and time on your first deals. Don't get me wrong, you can likely do this in the long term, but there is a lot to learn before you are competent to execute all on your own. Plus, working as a "lone ranger" is not the most powerful (strategic, competitive, and effective) way to work, two people working together is always more powerful than one person working as a "lone ranger". 

    So here's what I recommend you do: You need to start building your networks of help in the real estate development space. 

    The very first person to find is a mentor or developer to partner with on your first 1-5 deals, and have that be a way to learn fastest, lessen your personal risk, and share the cost burden that always come with underwriting new deals. Don't pick just anyone, you want to find someone who has integrity, is honest, actually does know what they are doing in the RED business, and wants to partner/teach with someone like yourself. 

    Last, go here https://www.biggerpockets.com/... and read the article I wrote about "6 Ways To Build Your RED Career", there's a bunch more in there about how and where to learn, that won't lose you money in your early efforts to be a real estate developer. As an attorney once told me..."holy ****, now that I know what you do, real estate development is not for the faint of heart, I don't know how you do it, and not lose your mind on a daily basis"

    ~ Scott

  • New to Real Estate · Allentown, PA · Member since 2019 · 62 posts · 19 votes
    6y
    Originally posted by @Scott Choppin:

    Hi Everyone

    After reading through many excellent posts, include the "Diary of a New Construction Project" by @J Scott and @Joshua Dorkin, I thought I might add our voice here on BP. I am proposing to track the entire life cycle of an urban infill 4-unit rental housing development project in my hometown of Long Beach, CA. My proposal is to create weekly posts that cover a development project from beginning to end, and to give explanations about what and why we do things certain ways in this project, as well as, the logic behind our decisions. We will share site selection, initial underwriting/proforma analysis, design development, permitting, construction/build out, lease up, and (for this project) final sale. 

    First, an introduction. My name is Scott Choppin. I have been married to my college sweetheart Rebecca for 17 year (together for 23) and we have three kids 15, 13, and 9 years old.

    The purpose for this series of posts, is to walk everyone through the development process, demonstrating the details and life cycle of a development project. I have had the great benefit of many very savvy teachers, and would like to give the gift of passing on knowledge to others. As well, my purposes include building my own networks of help (tactical, transactional, and professional) to learn, raise more capital, and find more great projects to work on. This is, as you all know (or you do now), the lifeblood of all developers.

    Finally, out of respect to my partners in this project, some details and proprietary information will stay private and so you may see redactions from time to time. As well, I will try to answer questions, but must limit cost in regards to time, so may be not be able to answer all questions. My goal, is simply to pass on knowledge, be an offer of help, and facilitate new folks in my network. So here goes....Sláinte.

    Project Basics:

    City: Long Beach, CA

    Unit Count: 4 units, rental housing, to be sold upon completion and lease up.

    Construction Type: Type V, 1 hour, with sprinklers. 

    Type V (pronounced Type 5) is a reference for wood framed construction that most of you are familiar with, with "1 hour" referencing the fire rating between occupancy areas (say between a garage, or other units) where extra drywall is added in the walls between these areas (there's more to it than that, but keeping it simple). The other types are Type I, II, III, IIIa, etc. These would be various forms of concrete, steel, wood and steel mixed. "Sprinklers" means what is says, all units and garages will have residential grade sprinkler systems installed (residential sprinklers normally have plastic or PVC pipes versus steel that you see in commercial applications).

    Construction style: 3-story on grade town home, direct access ground floor garage. 

    "On grade" is the typical construction methodology that you are all used to where forms are built for the slab and poured onto the graded dirt pad, this is in contrast to "podium" where the cars park underneath in a concrete garage, and another type is high rise construction. "Town home" describes a type of unit, where the living space is on multiple floors, with the same tenant on all floors. Versus stacked flats, like typical apartment units, where different tenants live above and below each other. Garages are the bottom floor of the town home and are direct access to each unit.

    Unit Type: Multiple bedrooms rented to families.

    Some maps and then that'll be it for today. Next time, site selection including site photos and discussion about zoning. 

    This is awesome, sir! This is my long term goal, now I'm just focusing on Buy and Hold method. Once, I found a unit that has bigger land, this will be the exact plan I really want to get into, try and maximize land.

  • Donovan SwainPro Member
    Member since 2020 · 15 posts · 3 votes
    5y

    @Scott Choppin,

    Thank you for taking the time to write about your development. Your post are not long. Keep it coming. I'm about to read your next one!. 

    Best regards 

    Donovan

  • Donovan SwainPro Member
    Member since 2020 · 15 posts · 3 votes
    5y

    @Scott Choppin, 

    I am enjoying reading your post. However at this time I can't view your links or related photos to review as I read. Is there any way this can be viewed? On to the next 

    Thank you 

  • Donovan SwainPro Member
    Member since 2020 · 15 posts · 3 votes
    5y

    @Scott Choppin Hi. Mr. Choppin, Great post really valuable information. I know I'm years late. I believe having dependable and reliable GC or SubC are important. I'm currently looking for them myself in my start. Look forward to see your post about how to vet them.

    Donovan S.

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