Multi-Family in Houston

1 Reply

Dear fellow BP readers - I am considering buying land in Houston and developing a Multi-Family building. Has anyone does this? Some immediate questions that come to mind are:

1. What are the rules around the size of lot required for a building size (or number of stories). Ie. if I have to build a 6 unit over 2 levels with each having 750 sq ft, so total building size of 4,500 - 5,000 sq ft, what would the minimum land size have to be?

2. How does financing for a project like this work? Would a bank finance a % of the land and also provide a construction loan? 

3. I would like to keep this as low maintenance as possible, but also want the economics to work, what is the minimum number of stories that require an elevator

4. What is a good rule of thumb for cost of construction? I hear $100 per sq ft, but is that realistic?

I would appreciate any responses, Thanks


We would likely need to get more specific to make some absolute conclusions with this scenario. 

1. Lot size is determined by size of building in terms of dimension 100x50 for an example.  From there we would study the survey and go to the code book to make sure we have room for what you need to make money. Lots over a certain size could also require detention. You also need to consider parking and pervious vs, impervious land. The city of houston requires these calculations. The number of stories shouldn’t be an issue.

2. There are a number of ways to finance, construction loan - buy the land and borrow construction cost  against the land and the new asset being built and then refinance when complete. If you have a bank relationship you could get a commercial line of credit loan where they allow you to borrow everything with a certain % down. Im sure there are are some creative things to do as well.

3. Usually 2 stores requires an elevator. We would need to study the code book and see what the minimums are to stay away from an elevator. There are some ways around it. I’ll need to look at my code book and figure out your options.

4. $100 a foot may be good for the building only. Need to consider dirt work, paving, architectural fees, engineering fees, permit fees, and potentials soft construction costs like trah and toilet, etc. SF cost on construction have gone up so it really depends on the type of finishes you install. You’d also want the building to be wood frame to save money.

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