Funding New Build 12 unit Apartment

10 Replies

Hello,

Was hoping to pick everyone's brain and get some insight. I have an opportunity to purchase a chunk of land ($100,000) in a very desirable spot in my hometown of Amherst, WI. This is the last piece of land that is zoned for residential rental units and is allowed up to 12 units on that piece of land. Right across the street a newer 8 unit apartment that went in in 2019 and each unit in there gets $1300/month in rent. What I'm curious about is funding the deal and construction. How do you go about raising capital for a project like this? How do you structure how to pay back investors, etc? Any input or advise on this would be super helpful! Thank you!

Is this your first project?  What do you know about the land? Has it been soil tested?  Are there utilities to it in place?  Are you sure about the density or are the 12 units being touted by the seller? If the project across the street has been a solid success, why isn't that developer acquiring this parcel?  Do you have a business plan?  What is the cost to acquire? Cost to build? Carry time?  Cost to carry?  Marketing plan?  You'll need a proforma.  

What you may need more than investors is a partner who is seasoned in either construction, land development, a seasoned real estate investor, or finance.  No one is going to jump in at the chance to invest in a project with someone who isn't experienced and/or doesn't have a complete analysis, business and marketing plan.  

It's not as easy as it looks...get a plan and resources in order first. Do the vetting on the land with both the seller and the municipality before investing money in development and testing.  

@Patricia Steiner I do have a partner who is very educated in construction and project development and has built his last 5 homes himself. He is currently working on developing blue prints for the apartments. Soil is good, utilities run down that road already. 100% sure on the 12 units as its been discussed at local board meetings. The reason the developer that has the 8 unit across the street is not developing this land is because the owner of the land refuses to sell this land to that particular developer. The vacant land is currently for sale for $100,000. Once the blue prints are completed I will have numbers on cost of construction which we estimate would be around 4 months. Don't have a complete financial analysis done yet but will once we get numbers on construction costs. 

@Eric Martin Great question and this sounds like a potential deal for sure! I don't think I could have said it any better than @Patricia Steiner said. You really need to do research and it sounds like you need a partner for sure. I don't know what construction is like in Wisconsin but people often overlook the construction arm of a development/project and that is not wise at all. You really need to find experienced partners for the construction and money side of things.

Having a deal will open the door of opportunity to bring in experienced people, so if this really is a deal you should be able to find the right puzzle pieces to make this happen because they will see the ROI/potential.

Just had another meeting on this yesterday and a few updates.

The size of the lot is 3.5 acres. Can build as many units as we can fit and design into that area. It is the LAST residential/multi-family lot available in the village of Amherst where I live. My partner has 40+ years as project manager and developer for a big construction company and we will be using that company he worked for to construct the project. We have decided to develop the land in phases and starting with a 4 unit first and once completed will move on to the next stage, likely a 8 unit.

The missing component is now the funding for a down payment on the first phase of construction which we are looking to pay an investor 10% interest on. If anyone is interested in that please send me a message to discuss!

@Eric Martin

Why not just go straight for the 12 units? I'd rather have one building to maintain than two and it's probably cheaper on a per unit basis to go straight for the 12 units.

@Frederic Babeux the main reason being funding. If we can secure an investor that is willing to invest on the down payment needed for the 12 unit right away we would do that.

We are willing to start at a smaller scale (4 unit) to build that relationship with an investor though if needed. There is plenty of room to fit between 16-20 units total in that space with garages so just depends on how we can get there. 

@Patrick Britton you bet! Should have final construction numbers soon so I can dial down on the costs, rents, cash flows, etc to present to any potential investors! If you know anyone that would be interested feel free to send them my way to discuss! Open to working with multiple investors to obtain what we need to proceed forward. 

Super exciting to see this happening just down the road! I think there are ~3 - 4 brand new apartment complexes under construction in my city, Waupaca :) You mentioned the new apartments in Amherst rent for $1,300, how many bedrooms does that cover? Good luck on the project! 

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