Multi-family New Construction BRRRR?

Question

Hey guys, I’m looking to help my family develop a piece of land we’ve had for sale for a couple years and hasn’t sold in Anchorage, Alaska.

Land value is around 9,000sqft. Worth around $76,000.

We will have around a $250k heloc if needed, $100k in cash, and pretty much own the land outright ($76k in equity). I have a strong income and should be able to qualify for a construction loan as well.

Issues currently:

-The piece of land doesn’t have utilities (so we’d need to bring in utilities / put in well and septic).

-I don’t know much about new construction, only have experience with my own 4plex I got a couple years ago.

1. where should I start?

2. Are there other options I could consider? What would be the best investment move considering the assets we have available?

Thanks in advance!

Ben Firstenberg · Answer

I think the best place to start is with finding a GC who can get this work done for you. Get a quote for the construction and see how it compares to completed value.

Owning the land helps a lot. Some lenders (emphasis on "some") will let that be your equity component for construction loans. Since land costs are often one of the biggest line items in a construction budget.

Depending on the location, you could possibly create some value by developing the land a little bit (bringing in utilities, maybe moving earth and leveling if necessary, even rezoning if you think it could work as a 2-4+ unit) and then selling the land as a "development opportunity". Given it's a smaller plot of land, you could maybe also create value but purchasing adjacent plots and aggregating into one larger piece of land?

Hope this helps!

Account Closed · Answer

The utilities are going to be the biggest hurdle to get over. Do thorough underwriting of the construction financials before you get into anything with the land, as these processes can be very complicated and expensive.

Andrew Postell · Answer

@Chidiebere Iwuoha Jr you have some good responses already but keep in mind this is the BRRRR Method forum.  There is a specific "New Home Construction" forum that might be a better fit for this type of a scenario.  You might get more responses there. I might suggest that the best investment is to sell that land and take the proceeds to work an existing property.  Building is quite expensive right now and buying an existing home is resulting in some strong incentives for buyers.  Just a thought.

Sepp Wigger · Answer

I agree with Ben,

Your first step is to determine what it is that you want with the land and your end goal. This will give you a direction for step 2. Step 2 is interviewing and talking with homebuilders and GCs that can build what you are looking for. I am an agent here in Anchorage and some companies like Hultquist are great if you are looking for a luxury home. I have had a lot of luck with Spinell as well. They will discuss what you are looking for and help you create a plan and provide cost estimates for the work. When going with a builder they can assist in getting all the utilizes set up on the lot as well. If you want any specific recommendations or contacts that can help let me know!

Multi-family New Construction BRRRR?

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