Real Estate Investor · Chilliwack, British Columbia · Member since 2016 · 8 posts · 1 vote
Colleagues!
In a hot British Columbia market in the Fraser Valley of beautiful BC - what filters/rule of thumb should we consider when consider purchasing four older homes (tear down and build a good size 4-6 story apartment)? (60 units 4 story or 100 units if 6 story) What are some guidelines you would suggest as we evaluate this opportunity? There is almost zero vacancy right now in our area - of course, it would be some time to get things ready and build and have ur first renters.Are there some math formulas that help? One can pay X for land to build e.g. 60 apartments or pay up to Y to build up to 100 Units? I know there are multiple variables on "what type of construction, amount you can get for rent, (here it would be close to $900 -$1,000/ month per 2 bedroom unit etc) - but on the land purchase itself what guidelines show I consider, please?
Secondly, what are your thoughts on number of units - is there a tipping point where more is better or a diminishing returns point?
I've been learning in this are as well; working on some deals. The way I've been approaching it, and have been taught to approach it by successful developers is:
- Find out what land has been going for in the area: Use your realtor. That will give you a baseline $/sqft to know if you're in the ballpark.
- Use the FSR to find out what the gross building space is (ie: 30,000sqft?), and use a conservative number like 20% of that as common property. So now your rent-able or sale-able area is only 24,000sqft. Make sense?
- Hopefully you have a builder already. Depending on the height, you may need to do steel and concrete which increases costs dramatically. So you ought to have a rough cost of building.
- Decide if you want it as a rental building, or a condo building where you sell the strata lots. This should be a market specific decision.... like if you are building on granville in vancouver your land cost alone probably puts you out of the range of building anything that cashflows as a rental building, but could turn a profit if sold as strata lots.
- Make sure you talk to your city/municipality about "DCC's", as this can cost a fortune, and would be an awful surprise if you didn't know about it. Actually it can't be overstated that you should be meeting with them a lot.. you want to work WITH them, and not AGAINST them.
Lots of number crunching.. and there's other ways to make money from it too - could consider wholesaling.. yes.. wholesaling a commercial site. Think large developers, or even BC Housing.