Investor · Los Angeles, CA · Member since 2013 · 32 posts · 3 votes
I am looking to get an idea of the cost it will be per sqf to rehab a 120 unit complex in the Denver area. It was former a section 42 complex which has made it a bit rundown. So far expenses are running at about 53% of income. With proper exterior rehab work, looking to make it from a borderline Class C/B property to a Borderline Class A/B property. Any developers in the Denver and surrounding areas know the typical cost per square foot on something like this?
Not to be snide but that's a little like asking what it costs to overhaul a truck without knowing what the "truck" is (S-10 chevy or Mac) or what's wrong with it (paint job or new engine and trany). I can say this, there is lots of repositioning going on here and lots of new build. I expect the top of the market to be really crowded in 1-2 years and see flat to decreasing rents and rental inventory skyrocket. Don't plan on rent escalation.
I do estimating for large construction projects in my day job periodically. Some of the work is in the LA area. We figure a 10% premium for that area so if you have experience in LA that would be a guideline. If you don't have experience then better team up with someone who does because that is a huge project.
Labor is scarce here so add time to your project.
I'm guessing you are trying to see if a project has potential. I would say this, if it's listed by a broker for any length of time it has been examined by some very experienced people. There is no shortage of funds chasing repositioning deals here. I am on a number of commercial brokers email lists and commercial residential property inventory is turning over quickly. It's my opinion that you need "an angle" to make something like that work.
I agree Bill, what I am asking is quite vague and I should of phrased it better in a comparability sense. I am using the information for estimate purposes in a Pro-Forma I am currently building for a client. I have done analysis for similar types of rehab work in the LA area so I am assuming any similar CAPEX work done in the Denver area is +10% of the same work done in the LA area correct?
I agree about the market rents in the area as well. It looks to be flat and with the large amounts of Section 42 and Section 8's that went online from 2002-2013, it looks like the outer Denver market will be pretty flat. The property we are acquiring definitely has a value add option which includes decreasing R&M expenses, utilities etc...
@Thomas Alexander Denver would be 90% of LA. $1,000 spent in LA would be $900 here. I think that's what you meant but not the way I read what you wrote.
Not saying this is wrong, because I do not know for certain one way or the other. But, it has not been my observation that skilled and unskilled labor is difficult to come by currently in Denver. Certainly not anything like 2005/2006 imo.
@Thomas I'd estimate rehab costs in Denver at 85-90% of Los Angeles