Investor · San Diego, CA · Member since 2016 · 351 posts · 141 votes
Does anyone have experience with new construction in Philadelphia building on Vacant Lots?
What is your estimated new construction cost of a SFH, or Duplex, or Triplex?
What is your MAO for Vacant Lots to still make your numbers work?
Are we all missing an opportunity with the 43,000 Vacant Lots in Philly ? Would love to hear any successes or failure stories of poeple who have bought vacant land and built successfully on it.
I’ve learnt it’s really tough to use an accurate cost per square foot number. For example, I’m doing three side by side duplexes and it’s costing me $135 psf, but I had to spend an extra $10k per foundation because of bad soil, and the smaller the property the higher the cost psf
I’m working on a 28 unit with elevator, demo required, green roof, and it’ll cost me around the same psf as the duplexes.
I’m doing three side by side triplexes which are full renovations, basement digout, all new facades, and that’s costing me about $106 psf for construction
Non of these numbers include architecture, geotech, MEPS, environmental, utility plan, or finance costs
I’ve learnt it’s really tough to use an accurate cost per square foot number. For example, I’m doing three side by side duplexes and it’s costing me $135 psf, but I had to spend an extra $10k per foundation because of bad soil, and the smaller the property the higher the cost psf
I’m working on a 28 unit with elevator, demo required, green roof, and it’ll cost me around the same psf as the duplexes.
I’m doing three side by side triplexes which are full renovations, basement digout, all new facades, and that’s costing me about $106 psf for construction
Non of these numbers include architecture, geotech, MEPS, environmental, utility plan, or finance costs
@Mayer M. Thanks for the detailed response, I wouldn't even think that things like soil could affect a budget by $10K. That's crazy the 28 unit is the same cost psf as a Duplex. Consistency could also be a good thing.
What neighborhoods in Philly were your new construction projects in, or was this Cherry Hill NJ?
Also do you know anyone else doing new construction in Philadelphia?
I would love to run land deals that we come across by someone to make sure we aren't passing up on good deals.
In 2017-2018 I tried valiantly to even just get offers in for land bank properties. I wouldn't be able to, then I'd see someone had purchase something I offered $20,000 had bought it for $10,000 and now were selling it to developers for $50,000. No one is missing opportunity with the land bank properties, it is just surrounded with red tape and corruption. Google what happened between Kenyata Johnson and Ori Fiebush. That's only one small example. I spent months spinning my wheels trying to get offers accepted.
@Alex Capozzolo I've done quite a few new construction projects in Philadelphia, mostly in the 2-4 unit range, but some larger as well. The costs ROUGHLY range from $105-$120/ft for new construction single family on the low end (if you're careful on costs/finishes, otherwise you can easily run way over that with more expensive flooring, appliances, etc.) and multis can run $120/ft and go way, way up from there.
Some factors affecting costs are:
- how small the units are - a 1500 sq ft house will be much more per sq ft vs. a 2500 sq ft house, similar to (10) 1 bed units will be much more per sq ft than (10) 3 bed units because the more you stuff into a smaller box, the cost per foot goes up, and you still have the same costs of a kitchen, hvac, foundation, etc. but you're spreading those same costs across much less square footage. I learned this lesson the hard way when I was building a few ~2400 sq ft single families coming in at around $105-$110/ft and then picked up a lot that only allowed a 1700 sq ft single family. I budgeted the same $/sq ft number and got crushed on that one. I don't know what the final per ft number on that house was but it was easily $25k-$30k over budget.
Some other factors:
- do you need structural steel which you can run into with odd shaped or wide buildings, especially if you're trying to get large clear spans or if you're going up to 5 stories. With 5 stories it's usually most economical to build the first floor out of steel and then stick frame the upper 4. You also run into a whole other level of fire ratings when you go to 5 stories.
- if the city water pressure is low in your area you might need a fire pump which could double the cost of your sprinkler system. It hasn't happened to me but I know someone that it did happen to.
- if you need two stairwells and an elevator, that will of course drive costs way up and it also eats into your floor plate area and can crush layouts on a smaller building, possibly turning your small CMX2.5 lot you'd planned to build 5 stories on into what may as well be a CMX2 lot and allow only 3 stories, since you can't actually fit 2 stairwells, an elevator, a hallway all the way through from front to rear, a small lobby, a mail room, etc. Learned that one the hard way...
It's really tough to nail down accurate build costs unless you have plans to get quotes but if you want to reach out, feel free and I'll give you my best guesstimate and can potentially save you from some of the mistakes I've made.
@Troy Sheets are these GCing yourself, or are you hiring a contractor? I'm not in the PA market, but it's always nice to understand the context of the costs provided. Out here in CA I'm always interested in seeing the cost differential between our vertically integrated developer clients, and a retail build-out developer clients.
@Troy Sheets are these GCing yourself, or are you hiring a contractor? I'm not in the PA market, but it's always nice to understand the context of the costs provided. Out here in CA I'm always interested in seeing the cost differential between our vertically integrated developer clients, and a retail build-out developer clients.
Hey Matt, great question! I build most of my projects myself but since I generally work with out of area investor partners on my projects, these costs are generally what any GC in this area would charge. I know there are probably some cheaper and I know there are more expensive GC's out there, but these should be good ballpark costs, although there are a ton of variables of course.
@Kyle Altenau wow that's crazy had no idea that all went down with the land bank. Does the city / land bank try to make money off of these lots when they allow developers to buy them? Like are they trying to make a profit?
Wild that you have to submit an RFP, didn't realize it was such formal process! What was the primary reason your offers weren't accepted by them?
I never received any communication directly from the Land Bank despite constant follow up and inquiries. The properties just end up going to the politicians friends for pennies on the dollar. The city isn't trying to make any money on the properties. They're just political favors. The developers have made killings on these properties.
I’ve submitted a few rfps to them. Total waste of time....they will also put the property out to bid to make sure they’re getting market value and they will make you jump through many hoops. The process could take more than a year and has all sorts of contingencies
@Troy Sheets thanks for the super detailed response I really the pointers. Make sense about spreading costs out more, and building bigger since you'll always have the costs of the foundation, roof, etc regardless of the size.
A few follow up questions...
- If you keep it to 4 stories or less, is that always a guarantee you do not need structural steel on the bottom floor?
- General budget/price difference for structural steel?
- What measurement do you consider 'low' when measuring water pressure?
Thanks for sharing the ups AND downs of what you've experienced!
Troy could speak to this better than me, but I’ll provide some input.
You could very well need structural steel for a 4 story building, just because it’s five stories doesn’t mean you can do all stick frame. For example, parking under the building would require steel, if the spans call for it you could need steel.
Also, just because you are five stories or more doesn’t necessarily mean you need steel either, or perhaps you could do a mix of steel and wood frame
Lots of variables and really need a plan set and a structural engineer to sort these things out
@Mayer M.@Kyle Altenau totally agreed about the landbank. I used to go to the sheriff sale and they would scoop up so many valuable lots and wouldn't allow bidding to the public. Then stuff like Kenyata Johnson and Ori Fiebush happens. So corrupt on so many levels.
@Troy Sheets Interesting about the water pressure. I never knew that. As far as sprinklers in rehabs, is there a hard and fast rule used? I've heard everything from 'depends on the level of rehab' and 'depends on how many units' and 'depends on how far the exit is from the farthest away point of the building'. I know 3 units and up require the hardwired smoke/fire alarm with horns and pull stations, but not sure about the sprinkler.
@Alex Capozzolo are pursuing a 4 unit building, but the lot size only allows for 3 units. The building was previously approved for 3 units and an educational learning center in 1978, (so 4 total units but with one of them being used for commercial use), so we are curious if the city will make us go through zoning, and with that, add a sprinkler system to the building.
In 2017-2018 I tried valiantly to even just get offers in for land bank properties. I wouldn't be able to, then I'd see someone had purchase something I offered $20,000 had bought it for $10,000 and now were selling it to developers for $50,000. No one is missing opportunity with the land bank properties, it is just surrounded with red tape and corruption. Google what happened between Kenyata Johnson and Ori Fiebush. That's only one small example. I spent months spinning my wheels trying to get offers accepted.
Yea there’s a whole block of empty lots on S Dover St in Grays Ferry that someone was able to grab for $1 a lot
@Alex Capozzolo as a wholesaler if you can find out what other lots sold for, to developers, you can use that to see if there is enough of a spread, and also don't forget about the ARV - or completed value on these lots. If you are in the right area where you can prove solid new construction comps I am sure you can wholesale lots easily, but as you know Philly is very much block by block. I just put one under contract from a wholesaler I know, I am sure he is making enough on it to be worth his while and it's still a good deal for me.
@Mayer M. and @Troy Sheets how do you guys calculate your cost per sq ft.? Internally I use the total building footprint but I am thinking in your answers here you guys are going by finished sq ft. including below-grade finished sq ft.?
Answering MAO is tricky and probably different for everyone, but I would think that most developers want to see around $100k profit or more as its riskier and a longer process than flipping an SFR where a lot of people are happy with 1/2 that or less.
@Niaz Butt thanks for the tips! You're right. I think since it's 'new construction' I assume it's way more complicated, and I'm sure it comes with different challenges and factors to consider, but as long as you buy it right, have supporting new construction comps, and are confident with your cost per sf analysis, you can hit your target margin - or close to at least! Had a good conversation with @Mayer M. on Friday about time spent on new construction projects vs time spent on a regular flip.
Feeling more confident about it! Thank you for all of the advice from everyone on this thread.
Just food for thought from a friend who owns a larger development company... "The contractors you use on new construction are different that the contractors you would use on a gut rehab. I asked our contractors for a bid to rehab a larger muliunit and they didn't even want to bid the job. This is because new construction is quicker and easier for my guys, so that is why I stick to it."
That's an interesting point. I figured someone that's used to working on new construction wouldn't necessarily want to work on a rehab. How do you feel about the reverse? I have a new construction build I'm working on and plans are almost finished (past the ZBA). Since I'm approaching the stage where I'm looking around for a builder what are your thoughts on working with a seasoned rehabber that wants to get into GCing new construction?