New construction costs per sq. ft small multifamily
Investor · Denver, CO · Member since 2016 · 213 posts · 57 votes
Hi all BoggerPickets...
I am curious about new construction cost for small multifamily projects. This would be for everything except land. We probably should assume a smaller mostly level infill site with rentable finishes. Location will probably be important for this discussion so if you could post where you are talking about. Maybe we could have best cost advantaged building practices.... Modular.. precast... stick frame... sips (structural insulated panel system ??).. block etc. My hope is that this could become a resource for any investor with a small house on a duplex type zoned lot. Thus helping all of us come up with a better value for some of these infill sites. Thanks for all your time and input.. Smole In :)
Clearly a lot of variables, but I can share a few real life scenarios. All excluding land costs and in Denver.
I finished a 7 unit town home project in August 15, near Sloan's Lake - we finished at $165 per ft - this is demo to door bell with all costs included
I am breaking ground on an 8 unit south of Sloan's in about a month - I am estimating $185 per foot again demo to door bell. About $140 a ft in hard construction costs - the balance is everything else.
Both of these projects are 3 and 4 story, modern, nice finishes with sales prices in the high $400's.
I just funded a single family house for a client last week - SFR about 5,000 finished sq ft - $140 a ft - completed value over a million.
Thank you @Dorothy Ma for your informative post. I did SIPS once and had mixed feelings about them... They are making precast with a foam sandwiched between inner and outer concrete but sounds like they are having some good and bad results... Thanks @Marcello Di Gerlando for your links... interesting and seem in line with what fellow BP investors are finding. Also, if you google shipping container homes I am sure you could move into some of them. They can be really cute. the 40 foot containers can be delivered for around $4000 each.. they can be supported on on 4 corners but building depts like to see a full foundation.... on the ships with minimal bracing they can stack 12 high empty (12 stories). Cut side panels out to widen a room to 2 containers. Great for the new micro apt. trend. Newer idea but have issues themselves. you have to look.... and anything this cool will have a higher cost attached... https://www.google.com/search?q=cool+shipping+container+homes&rlz=1C1CHHZ_enUS505US505&espv=2&biw=1920&bih=979&tbm=isch&tbo=u&source=univ&sa=X&ved=0ahUKEwjF9KyzlN7KAhVF4D4KHc0hCc0QsAQIGw
@Nate Wightman the challenge I have heard with shipping containers in Colorado is protecting the wet utilities from freezing where they enter and leave the structure. There is also the challenge of draining the waste and properly venting the plumbing system. The devil is in the details.
@Bill S. Yes, but I think if you left a gap between containers to use as a plumbing chase then it could be properly insulated... just options... thanks
@Nate Wightman I completed a project similar to the scenario you describe in September 2015. The location is Boston, a high cost area. This was a classic urban infill project... I owned a multifamily with an attached lot that contained a dilapidated garage... I took down the garage and replaced it with a modular duplex.
The duplex is approximately 3,500 sf... the first and second floor of the premise was built at the modular factory... the third floor was "stick-built" onsite. Site work and hard construction totaled approximately $460,000, which equates to $131/sf. I also spent an additional $25,000 for soft costs such as surveys, engineering, permitting, and hard money carrying costs.
It should be noted I went a little overboard with some of the specs and finishes to make the units "condo-conversion" ready if I ever decide to sell. For example, the layout included five bathrooms which definately added to the cost, In addition we used real hardwood through-out, higher end tile in the bathrooms, hardiplank siding, higher end fixtures in the kitchens and bathroom as well as included granite counter tops, central A/C, stainless appliances, four-piece coin-op laundry setup in the basement, etc. I think I could have saved $30,000 - $40,000 if I went with the basics. Also of note is my cost included a $15,000 cost overrun for sitework associated with storm-water runoff.
Believe or not, this property does cash flow nicely.... Rent @ $4,000... debt service @ 1,954, operating expenses @ $765, vacancy @ 100 (2.5%), capex @100 (2.5%). Overall, cash flow is about $1,000 a month on this property, which is a little less than what my other properties produce. BUT I anticipate this property will also produce taxable losses (because of relatively high depreciation) that can offset some of the taxable income from my other properties. Getting cash flow and taxable losses at the same time is SWEET!
Overall, new construction of a small multifamily can make a lot of sense if rents in your area support the cost and you already own the land or can get it cheap. Below are pictures of the new duplex.
@Bill Thompson Thanks so much! Alright BP investors.... check out a Modular building.... this was probably delivered in 4 modules up and down on the left and up and down on the right and because of the steep roof as is standard back East they built the roof and dormer and maybe third floor bedrooms onsite... the modules get driven down the street so power lines don't like tall things.... :) typically a modular building is shipped on a steel frame that is removed when it gets to site and then is fastened to the foundation like any other house.. mobile homes stay on the steel frame and are a completely different animal. Building depts mostly like modular homes but not mobile homes. Bill could tell us but I will guess with a full foundation this house had about 4 - 5 months of construction on site probably with gaps in the middle waiting for modules... if it were stick framed probably 3 times as long.... so 8 months at $4000/ = $32000 additional rents collected due to modular design... the modular pitch line is that it should cost 20% under stick framed. I don't know... WOW Bill, what a great post... pictures.. details .. just great. And it looks great! any post construction thoughts on the good and bad of modular?
@Bill Thompson Just noticed. Bill has 39 posts and 40 vote... quality here posting and obviously in building also... Thanks
Sorry all, but I am having way to much fun... precast house with $ estimates
http://www.builderonline.com/design/a-hurricane-proof-concrete-house-with-a-designers-touch_o
@Nate Wightman I am loving this post and having fun with it too. Did you have a link to the modular building you were describing 3 posts ago= 2 up and 2 down?
I am a reluctant builder, having bought at auction a dump that was more of a dump than I thought, so I am analyzing my options including a scrape and build. Unfortunately I paid way more than I should of for a scrape so thinking a duplex might work better to catch me up financially than an SFR would.
Got quoted $85 a square foot for cheapest grade to $125 a square foot to build medium quality with SIPS (all this assuming I've already paid the ~$5k for the demo and the $whatever for surveys, soil tests, etc but not sure if it includes plans.)
Since i'm in Florida, am looking at your hurricane proof building too! Best of luck- will let you know what I find out down here.
@Nate Wightman you are right on point about the modular configuration and delivery process. I will add that the way to achieve the greatest cost efficiency with modular is to "stack the boxes". I went with the dormer roof to be consistent with homes in the neighborhood. Stacking two more boxes and going with a flat roof would have cost a lot less.
You are right again with the timeline... It took 4.5 months to complete the house ("set date" to Certificate of Occupancy). However, it should have been completed in 3 months, tops!. There was a lot of drama and unnecessary delays along the way.
With modular, the site work and foundation is done prior to the house is being built... It takes only a couple of weeks to build a modular home at the factory... ideally the foundation should cure for much longer than that.
Oh, how can I forget, the permitting process took FOR EVAH but that's a story for another day.
Here are the takeaways from my experience...
1. Modular is BETTER QUALITY than stick built: I am totally impressed by how solid, overbuilt, and tightly insulated the modular units are. My duplex achieved a HERS 5+ rating (the highest available) for energy efficiency. I didn't specify a green, energy efficient home, it just came like that from the factory.
2. Modular is less expensive, but not dramatically less... 5% - 15%, maybe. The real value-add is more certainly surrounding the cost... e.g. less potential for delays due to weather, scheduling, cost of materials, etc.
2. Your experience with new construction will be determined by your local permitting process and how the building inspectors treat you. There is the potential for a lot of delays, red tape, and needless hassle if you or your builder do not have connections in the right place. Beware, some localities (like Boston) are extremely pro-union and will go out of their way to make your life miserable for choosing modular.
3. The big wild card from a cost perspective is site work, not construction of the building.
4. Modular construction can be a great way to go in the right circumstance. If you are a novice at construction, hire a GC to deliver a turn key product.
5. Regarding construction, all went well until the GC became over extended. With modular the "button-up" work that is done in the three weeks after the house is set is very important. The GC needs to be there to ensure everything goes smoothly. My GC had previously scheduled a "house set" toward to end of my job. He literally disappeared for three weeks! I thought I was going to lose my mind. The other thing that happened was my GC's subs started to bail on him... too much big construction luring the trades away... very difficult to find good people to work on small jobs. Fortunately, I was able to take on a lot of this work using my own subs to minimize delays.
6. Financial considerations... low capex, low repair budget, feasible to go longer on loan amortization (I chose 35 years!) because of extended life of asset.
7. Modular solves the two biggest complaints from my tenants... (a) cost to heat the apartment and (b) noise from other tenants in the building.
Hi @Waverly Rennie you will laugh.... the 5 pictures just above these post... a modular building... I am guessing at the 2 over 2 .. but will let Bill fill in the actual details. more precast ideas now.... this has a different floor system.. kinda cool. https://www.pci.org/uploadedFiles/Siteroot/Publications/Ascent_Magazine/2005/Spring/as-05sp-2.pdf
@Waverly Rennie if you go with a duplex I would try to design it like 2 townhomes.. then the exit would be sell 1 or sell both or rent... modular may work well for you if you could. modular limits the time you need a GC on site. Hope you are getting good info on the scrape and not just someone looking for work. laugh lots
For those of you interested in modular check out these "set day" pictures...
This is the site at 9:00 am on set day.... nothing there but foundation
This is delivery in progress..
This is the end of that same day... instant gratification!
This is an example of what the inside looks like immediately after set.. level 5 finish on the walls, primed, windows and doors installed with trim... notice even the door handles and outlet covers are installed
@Nate Wightman duh, thanks for explaining. You and @Bill Thompson have written some amazingly useful stuff here. So helpful for a sorta newbie in a sorta bad situation. I am trying to treat this as my "try not to lose too much on your first deal" situation even though it's not quite my first deal............
How does one find a good GC with experience in building modular? are there brands of modular one should look for?
thanks again for all this useful info.
Hi @Waverly Rennie does your property have city water and city sewer or do you have well and or leach field and septic?? Also, there can be a benefit to using some of the existing structure and building on to it ... It may let you build into the setbacks. advantage to going with up and down (2 story) modular is you have 1 roof and 1 foundation for 2 modules... cuts cost/sq ft
Hi Nate- it has city water/sewer/electric etc so at least that's a benefit. I do like the idea of the two story. I am buying/rehabbing homes to rent as short term vacation e.g. AirBnB since there is a big demand for that here, but i like the duplex as a backup exit strategy if AirBnB gets shut down, you can still rent two doors better than one.
I am trying to find out about the whole "keep a wall hence it's not a new build" thing here to see what the advantages are. I think the existing house is within the normal setbacks so that doesn't seem to be an advantage. The house is built on cinderblock piers over dirt- welcome to Florida.... I think a shallow trench foundation is what is seen as better here. Will talk to a few construction guys and a developer I am working with on a high-quality build small development on a lot I have elsewhere. Oh, the learning curve!!
It could be jacked up and a new foundation poured beneath it.. then let back down and fastened... if the piers are the biggest problem
Sorry all, but I am having way to much fun... precast house with $ estimates
I have designed 2 precast concrete houses like this for the National Park Service for seasonal housing for staff. We used the same floor plan for both. They are located at Flamingo Park in the everglades. They are designed for hurricanes and tidal wave flooding as well. I cant find any better pictures I have. These where functional, not fancy, but they turned out well for NPS. We included a screened porch on the front of them. One unit was handicap accessible with a really really really long ramp!
One 40 foot shipping container is 320 square feet. Here are some micro apts. in NYC note the murphy type bed that folds down over a sofa. 60,000 people applied to live here... http://www.nytimes.com/2015/11/22/realestate/leasing-begins-for-new-yorks-first-micro-apartments.html
@Jim Adrian Thanks Jim... very cool. I am just loving what I am seeing with precast. The floor structure of the Nebraska building was fascinating. I have also been reading a little on precast foundations... this also seems very fast if it proves out...
@Waverly Rennie To find a good GC for modular you should identify some modular factories that service your area and ask them for recommendations. Modular construction is still a fairly young industry so the factories work with a relatively small group of GCs that specialize in this type of work.
@Nate Wightman Great article on shipping containers. I have been looking into building with shipping containers for awhile... this would be perfect for a port city like Boston. Unfortunately, I doubt the "powers that be" in our building department will let something like that be built in my lifetime.
Here is an interesting article... breaks down the cost/sq ft for 3 different apartment building types..... http://www.sddt.com/Commentary/article.cfm?SourceCode=20140514tza&Commentary_ID=200&_t=The+rents+needed+to+justify+apartment+construction+costs#.VrYKcfkrKUk
@Nate Wightman so you are not the first to consider this. I know someone that looked into the option of building a small multi-unit project (10-30 units). He is a landlord through and through. He looked at it 15 different ways to Sunday. He couldn't make it work. The bottom line was, even as hot as the rental market is, he could not make the property cash flow as a rental. He has chosen to building new and selling. It's my opinion if this guy couldn't do it, then it's probably not doable. I'm not intimately familiar with his deal but he is a very thorough and detailed person. He has made a boat load of money in real estate in Denver.
So, I also have been trying to make some cents of this.. you can find 4 plex's and 8 plex's selling for $130k per door (+- 800 sq ft) in a market that will pay up to $300 per square foot for 1 bed 1 bath homes (300 x 800 = $240,000) 2 bed @ 215k, 3bed @ $211k and 4 bed @$193k found here http://www.trulia.com/real_estate/Highlands_Ranch-Colorado/market-trends/
Thus, the problem is why build a small apartment complex on open land that may command $150k per door with fewer exit strategies and smaller group of buyers, when you can build townhomes with similar footprint, with a similar door count, a much higher sales price per door, multiple exit strategies and the whole population is your buyer.
seems to me the most equitable use of soil would be to build 3 stories with the first story being single floor unit and 2nd and 3rd floor being a 2 story townhome type or condo look to allow for individual sales and possibly sell the vertical units as live in one and rent the bottom.... ah that was a cool thought ... up and down duplex sold like a townhome. command the selling price and market share of a duplex.
@Nate Wightman the devil is in the details. So the town houses are in fashion because there is no HOA. Each unit sites on it's own piece of land. There are party wall agreement but no HOA. That is driving in part by the construction defects laws and insurance companies. For a while it was impossible to get insurance for new construction condos. I'm hearing that may have loosened up a bit but it shaped the market when it was in play. What you described would require an HOA.
Also the zoning and parking are items to consider. Generally speaking, the higher the occupancy (number of bedrooms) the more parking you need. In Denver, this is driven by zoning regulations. A two car garage on the mainfloor for a 3 story townhouse meets the parking requirements and allows for almost complete coverage of the zone lot. If you convert that first floor to living space vs parking you have to find somewhere to park the cars. That means land or digging it down. Buried is impractical for anything but large parcels. Land is expensive which means you need at twice to three times as much land. That drives up costs and the highest and best use falls back to the three story townhouses.
Listen, I'm not trying to shoot down your ideas as I'm all for thinking outside the box. I would say the market is pretty efficient within the requirements of the current building and zoning codes. The current rules have been in place for 6 years and there are people that eat and sleep development and if they haven't figured it out by now it can't be done with the current rules.
Bottom line is, right now, building small apartment buildings makes no sense. If the "rules" change in some form or fashion (economics, zoning, building, etc) then it bears looking at again. Until then, trust the market.
Hi Bill... Thanks this is the up and down of brainstorming... I am curious if this would fly... parking in a front carport. Then could a up and down duplex have same or similar rules as a town home. duplexes are selling for almost 2 times the price per door as 4 and 8 plex's. and the flexibility to rent or sell off in pairs ... live upstairs when younger and move down when older... mother inlaw suite.....