New to the industry. We have land in New Jersey and are looking to build a multifamily property. What are your thoughts and/or advice?
Hi Kati, how are things going with you build? I am in a similar boat of looking for guidance on building on land I already own.
Hi @Kati Dang and @Don Johnson . Do y'all have more targeted questions? You'll get much better help & advice from the experienced members BP if you can explain what part of the process you are in, what exact questions you have, area's you need assistance in, etc.
Because I do not know much about your projects, my first recommendation is doing as much due-diligence on the site as you can first, then reach out to the governing City/jurisdiction where you'll need permitting. Understand the zoning code and requirements of your land, will you need to rezone(?), what the zoning allows you to do and what it restricts. If the sites are larger than 1/2 acre (NOT AN EXACT NUMBER), and you are needing to develop the land (i.e. roads, utilities, mass grading) I would then recommend involving a civil engineer on a site plan and to do a more in-depth due-diligence. However that could be irrelevant depending on what your exact project needs.
Best of luck on the projects!
Hi @Jaime Hora, thanks for the reply. Here is where I am so far:
1. Own 1 acre in Central, CA with an existing fourplex that is being rented out. Have owned it for about a year.
2. The remainder of the land is relatively flat and has sewer installed to the back of the lot
3. Zoned R3 - up to 30 residential units - I have spoken to the city planner and confirmed the zoning and ease of permitting.
4. Similar lot next door has ~15 units across 5 single story buildings.
My goal is to build a 15-20 unit apartment units on the site. Likely multiple single story buildings which would be similar to the lot next door. It's a growing area and I have had a pretty easy time keeping the existing fourplex occupied through my property management company thus far.
What I'm hoping to learn from BP community:
1. Where do I go from here?
2. Is the first step an architect, engineer, builder, financing?
3. Referrals or recommendations if anyone know professionals in these fields in the Central Valley in CA.
4. Strategies or recommendations for unit mix. My current portfolio is mostly 3/2 units in small multi family so I'm thinking I'd like to build this property 20% 3bd, 60% 2bd and 20% 1bd. But open to recommendations of course.
5. Anything else I'm not thinking about that I should be.
Check your parking requirements for point #3. That will determine what you can actually build on site to reach density... and then consider if the cost of underground parking will be worth the cost to add the units.
Then do some very rough napkin math,
Determine your footprint and how many floors you can do within the height restriction of the zoning. = Total sq ft.
Then determine your usable sq ft. from the total sq ft. calculation, ideally you want to aim around 74% usable space. (More the better) Total sq ft. * 0.74 = Rough Usable
Then determine your rent per sq ft. of usable space. Then take your usable space and determine your gross rent for the building. You can also use these to determine the sale per sq ft. (Condos & SFH etc)
Then calculate your hard cost and soft costs and include your land cost. I use 30% of hard cost as the total soft cost in multi.
Once you start making sense of those basic calculations you can start solving other pieces of the puzzle.
1. Consulting can save you a lot of time and costly mistakes in your earlier projects. Then once you see how they do the numbers and get experience you can start to take on more yourself and not use them for other projects down the road.
2. The first step would be to determine if you have a viable project, once you start engaging an architect and the like they will start to bill. Architects will draw until the end of time and can become costly if you're not clear on the project and also hiring the wrong architect that doesn't have a track record with the type of building you want to build will be costly. (They will learn how to do it on your dime)
3. As much as real estate is hyper local, the proper team can be located anywhere. However, using locals that are familiar brings a significant advantage since they are familiar with the key players in the area.
4. Unit mix should be market driven and keep in mind there may be benefits to having a % of the building affordable and accessible. Keep in mind you can get more clever base don the shape of the building. Studio, 1 Bed, 1 Bed + Den, 2 Bed, 3 Bed Penthouse.
Thanks @Paul Hanchard !!! I'll go through the math based on these inputs.
You mentioned Consulting. Do you have a few recommendations on people/companies who offer this service?
@Don Johnson sounds like you have some real potential here. Exciting!
Agree with @Paul Hanchard your next step is to dive into the details of the zoning and see what the parking requirements are. In your area you probably will require at least 1 spot per unit and possibly more for 2 and 3 bedrooom units. Parking requirements are often the single biggest driver of what your project looks like in terms of design and unit mix.
In the simplest terms for maximizing cash flow you want to build the max number of units with the max number of bedrooms for each unit. So as an example if you can build 30 units all 3bed/2ba that’s the max cash flow that’s better cash flow than 30 1BR units. But parking requirements and also city requirements on unit mix will probably limit that just keep in mind a 2 or 3 bed unit makes significantly more money than a studio or 1 bedroom and the cost to build the larger unit is not significantly more esp when you have economies of scale on a 30 unit project.
Also be sure you look into “density bonus” which is a California law that allows you to build *more* than 30 units if you designate some of the units for lower income folks. This is a major tool used by developers in the Bay Area to get more units and boost the cash flow even higher. Here is an overview.
I would also look into utilizing SB35 which is another state law that can get you planning approval within 60-90 days which is light speed compared to the 12 to 24 months it normally takes - or longer if there is community opposition to the project. You do have to designate some units lower income to utilize this very powerful law. https://www.jdsupra.com/legaln...
I think you might want to find some local developers who might be willing to “mentor” you for some compensation. You are at the beginning stage of scoping the viability and cash flow which is what developers always start with! Good luck sound exciting !
Thanks so much for the resources @Carlos Carbajal !!! I'll look into how I can leverage the density bonus and SB35 for this project.