Updated 3 months ago on . Most recent reply
Guidance on Multi-Family Project
Hello BP Community! Need a little advice on a deal. I'm interested in purchasing a multi-building (under 25 unit) project from a seller. The buildings are vacant, built in the 50's, and are basically a gut and redo. The structures themselves are good and in a great location. Everything inside and the entire site will need to be enhanced and brought up to current code compliance. It's basically a lot of work requiring numerous trades, permitting, money, etc.. Probably 8 months of my time as a GC/Project Manager onsite. I'm experienced in construction as well as RE investing so that's a concern. This would be a step up though from my past RE investments and the seller and myself are trying to come up with a fair price for both of us.
Using not exact but simple figures, once complete and stabilized, the complex will be worth 3 million. 750K in enhancements and soft project costs to get renters inside. What would be considered a fair purchase price in its current state? What's a fair margin for me as far as sweat equity? I'm obviously not going to pay 2.25 million, I'd rather just go buy a 3 million complex and start receiving checks day 1 without the headaches. I know what margins SFR gut jobs sell for but I doubt those exact margins carry over to multi-family. Any advice or thoughts would be appreciated.
Most Popular Reply
Jerry, your framing is solid and the numbers you’re walking through are in the right ballpark.
One thing I’d pressure-test a bit more is time risk, not just cost risk.
On projects like this, the biggest misses I see aren’t the line items you already listed, they’re what happens when the timeline slips 3–6 months:
- Extended carry with zero income
- Re-trades or inspection surprises once walls are open
- Slower-than-expected lease-up while capital is fully exposed
That’s where otherwise “safe” equity cushions get quietly consumed.
If you assume everything takes longer and costs slightly more than planned and the deal still works, you’re probably priced correctly. If the margin only exists when execution is perfect, that’s usually a sign the purchase price still needs to come down.
At that point, seller motivation matters more than math. If they won’t move meaningfully off $1M, your instinct is right, you’re effectively underwriting stabilized risk without stabilized pricing.