What does it take to build an Apartment Building??

Question

HI BP

It's been a while since I have been on BP.

I have been toying with the possibility of building an apartment building.

This is a bucket list thing, and I think an opportunity has come up.

This is a VERY general question, what do I need to consider when building an apartment building.

This is something OUTSIDE of my expertise.

I have a general Plat for the lot, and a general usage, building location rendering. (Which hasn't been approved by the municipality according to the agent)

I have looked briefly on USAGE and Code/Ordinance, it's a Special Use, and it seems I can do what I want, if "everyone" agree.

I have contacted my Financing people, but I haven't gotten details on how to structure the loan.

I know the rental market in the area, if my numbers are correct (Ha!) it should work out...

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If this works out, I am buying VACANT commercial land.

1. Should I buy it with the approval in place? or buy the lot and then build in future?

I do want to make sure I can do what I want on it, 20+ unit. the current rendering is for restaurant/office/medical (3000-12,000sqft (2 stories))

2.  How does one usually structure this kind of loan? is it a construction loan?

3. What must I consider when building an apartment? Traffic, parking, fire sprinkler system, elevator? garage parking? Storage?

4. How long does zoning approval take, how complicated/annoying is it? I have the list of all the docs required.

5. Get an architect or pick a building plan online and go to builder?

I am sure I am missing other IMPORTANT questions.

Any advise or share of your experience will be helpful.

Milan Mehta · Answer

Hi @Jennifer Lee , I agree with @Mark Creason . I recommend hiring a civil engineer that is familiar with the area and approval process in that area.  You want to make sure that the site is "buildable" to what you desire.  A step further would be to enlist an architect or design professional to put together a feasibility study.  They can come up with a design, a cost-estimate and a schedule.  Put together a proforma to see what it would take to buy the land and build.  Prove to yourself on paper (design-wise and financially that the project can work).  Don't rely on a rendering.  The loan can be a construction loan.

Mark Creason · Answer

I would not close without a zoning change.  I have a client in Texas trying to get 25 acres changed to apartment zoning.  Been a year at this point without approval.

Mark

James Mc Ree · Answer

In addition to the above advice...

Hire a real estate attorney to navigate the legal approval process.  Establish a contingency in your property purchase agreement that you obtain all of the necessary land development approvals before you close on the purchase.  It will probably take 3-6 months to get your land development approval.  The contingency will allow you to delay payment and protect you if it doesn't work out.

The attorney will cost some $$$, but will also save you a lot of time when combined with a professional engineer.  Choose providers who routinely practice in your municipality.  Your municipality might be able to give you some good names.

Jennifer Lee · Answer

Hi

Thank you! A quick follow up.

All of the advice are very good. Thank you.

I met with the municipality. I found out that the lot adjacent will be a 300 unit apt.

On the bright side. At least my evaluation of area is proven.

But I have to pivot and see an alternate highest and best use for this lot. But now I know the usage and have some of the process addressed.

Next step to see if what I want is buildable ;)

What does it take to build an Apartment Building??

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