All Forum Posts by: Mike Wood

@Adrian Chu  In my city, its pretty quick.  This assumes that you dont have to get any zoning variances.  Without zoning variances, I can get a permit in 2-3 weeks after submitted the plans and application.  If I need a zoning variance (over half of mine projects needed zoning variances), it adds about 6 weeks to the process.  This extra time is due to the timing of the public zoning meetings that meet only once a month.

@Matt Faircloth In addition to not meeting most building code, you will be introducing a ton of moisture inside the unit.  That can lead to all kinds of moisture related problems.  I would suspect that you'll see paint peeling and mold pretty quickly after the tenants start using the dryers, in the area around the dryer.

@Nick Diecidue Your budget is way, way too low.  You couldn't do the work yourself (material only) without permits for the money you state.  Plus, in NOLA, you will need permits to complete the plumbing and electrical work by licensed subs. There is NO way to get another meter without a licensed electrician with permits, plan and simple.  Is the property zoned for a duplex, if not you will need a variance from city hall with is another headache.

Also, you do not want to make tenants live thru a large renovation as you mentioned.  Adding a bathroom will be a big renovation.  I would have any tenant vacate house prior to the renovations. Its doubtful they will be willing to pay the increased rent (they obviously like the size and price as is).

If you are splitting the electrical service, its very, very likely the entire electrical system will need to be brought up to current code.  Personally, I would budget at least $3500 for separate service, and that assumes the existing service is all up to code.

Lastly, are you sure about the rent numbers?  A $800/month duplex is not good rent and likely in a marginal area of New Orleans. If that is the case, I doubt you would get $1200/month for a 3 bedroom unit.

While I am guessing because you did not give much information at all, I would bet the renovation would be closer to $20k for what your talking about doing.

@Thalia G.  We don't put dining rooms or dining nooks in any of my units.  I prefer an open concept floor plan.  We almost always have a kitchen island or peninsula with seating in our kitchens.  The kitchen counters overhang (12") on one side so that seats or stools can be used.  Almost all of our units are two (2) bedroom, so we design the island or peninsula to accommodate 3-4 people seated.

That way tenants have a place to sit and eat, and they don't have to take up a bunch of floor space for a dining room set.

@Troy Williams Elevated houses at or above BFE or not in a flood zone will have a minimum flood insurance cost of about $650/year for a non-owner occupant house.  Dwelling insurance (including wind & hail coverage) is separate and depends on the house construction, age and value.   For the most part, the costs of this coverage is linear with value, assuming the same deductible.  You really should get a quote for this cost. 

Some insurers will offer dwelling insurance that excludes wind and hail coverage (hurricane), and then you will need a purchase a separate wind and hail coverage policy for the state run insurance fund.

For my new construction houses, values in the $200-250k range, dwelling insurance with wind & hail coverage cost me around $2000/year.

@Shane Bracewell Really hard to say, what the minimum lot size would be, as so many things affect it like setbacks, parking, etc.  I will say, its doubtful that you will find anything that will actually support a 5+unit building on a single lot in New Orleans. To do that, your talking about combining lots (which gets tricky).  Since you will have to provide offstreet parking, all of which must be behind the front face of the house, you will either need a driveway to the back with parking, or enough lot width for cars.  Each parking spot must be a minimum 8.5ft wide x 18ft long, so that adds up fast, and will be a big design driver in any design. If I wanted to build a fourplex (I would not go to 5 units for the reasons stated above), I would need 34ft of lot width for parking, plus the house (which would be staggered around the parking) which should be at least 20ft on the front face, that would require a lot 57-60ft wide and even thats tight.  Thats basically two 30ft lots, in any area close to downtown.  

As also stated, going over 2 units is going to add alot of costs that aren't needed in 1-2 family homes (sprinkler system, more fire rated partitions, possibly heaver framing, etc.).  If you have been around NOLA long, there is a reason you dont see many small (3-8 unit) new developments, they just cant be justified.

On the triplex I wanted to build, it was ~2800ft2, and the sprinker system alone was $26k (thats $9.29/ft2), and that is just one example of the added costs.

What I do is find infill lots that can support decent rents and build new duplex units.  Relatively easy to finance, easy to comp (based on sales, not cap rate), relatively cheap to build, and more desirable to tenants than apartment complexes.

@Shane Bracewell  Don't count on your variance's being approved. I have built 5 new construction houses in New Orleans, and getting variance is not easy (I have been thru the process several times).  I can also tell you that in NOLA, $120/ft2 will not be enough for 3+ unit MF, unless you are building to most basic house possible, and even that is not likely.  I just went out for bid on a triplex in NOLA and the costs came back in the $150-170/ft2 range.  I choose to build a much more economical duplex (which my builds have been in the $90-120/ft2 range build costs only).

There is no way the city will approve a 5 unit building with no offstreet parking. Won't happen.  The MU-2 zoning requires one spot per dwelling unit.  So now you have to put parking behind the front of the house for cars (5).  Unless its a corner lot, that means raising the house for parking underneath.   Even a corner lot would require over 40 feet of lot depth for the cars.

Lets assume that you keep a 3ft side lot setback on each side, that will limit your building to 24ft wide.  Sure, your MU-2 zone will allow zero setback, but you will not be able to put any windows or opening in walls set on the property line (assuming its not a corner lot).  You need natural light in the rooms, and egress for each bedroom, so that will have to be doors or egress windows in each space.  Based on this, now the house will have to be two living floors, plus parking below, so basically three stories tall.  You'll want to limit the floor area (>3000ft2 I think) of each floor to avoid elevator requirements.

If you paying an architect, you really should sit down with them to discuss how feasible this is.  They will want to keep working on it to increase the billings, but if its not feasible, your just wasting money.

@Nik Moushon Thanks.  Good to know.

@Shane Bracewell I think your chasing unicorns.  I think you likely wasting alot of money for something that is not feasible.  I would caution about spending too much money looking into this.  

4000ft2 lot is likely a 30'x133' lot.  You will need to provide offstreet parking for each unit. That means elevating the entire structure for parking under ($$$).  Also, 600ft2 units would be max 1 bedroom.  Even that would be small.  I wouldn't personally waste time trying to design to 800ft2, just too small for a 2/1 now a days, but that me (all my 2/1's are 900-1000ft2 each).

I also think that finding financing for this is going to be tricky, as I assume this would be your first development (its a big project to start).

@Shane Bracewell Everything will be way easier building a 4 plex than a 5 plex.  Construction financing will have to be commercial, and the banks I have talked to will only do 70% loan to cost on 5+ unit development (that's a big down payment).  Your costs will increase also with a 5 plex.  I bet you find that the 5 plex is just not going to work, not in the greater NOLA area.

As for lenders, you would be looking for a local bank and does new construction commercial development loans. Gulf Coast bank does do these, as I have spoke to them about 8-12 unit development, concept wise.  After construction is done, you would refi the construction loan into a typical commercial loan, with typical commercial loan terms (no 30 year fixed, most likely 5 yr variable interest, 5 year balloon).  

Not sure what you mean by refinance the initial loan, are you financing the lot loan?

Based on what you stated, I would estimate that a 5 plex would cost you around $600k to build, assuming that its only 4,000ft2 (800ft2 x 5), but it could be bigger once you factor in stairs and other common areas.

Guessing on your other costs

Build Cost $600k

Land Cost $100k

Soft Costs $15k

Misc Cost $5k

Your looking at something in the range of $770k, which would require $230k in cash/equity to build.  Maybe after several years of stabilized rent history, you could refi and get some of that cash out, but not immediately.

Unless this project is in the nicest areas of New Orleans, you'll be lucky to get more than $1200/month per unit (long term tenants). 

I would not do a deal that costs me $770k and only grosses $72k a year.

@Shane Bracewell  Your post does not give a lot of information.  I have built four (4) new construction duplex houses in NOLA, with another one currently under construction.   Assuming your are looking at 2-4 unit buildings, non-owner occupant, I would recommend talking to Gulf Coast Bank.  

Since you stated building in New Orleans, you'll have to find land that would allow for 3+ units, which is not common.  Land where duplexes can be built are pretty easy to find.

You will need 20-25% of total cost for down payment/equity for a construction loan.  

As for estimating costs, that really depends on what your trying to do. Duplexes can be build for around $85-100/ft2, assuming middle grade finishes, this does not include land or soft costs.  3-4 unit building would be a decent amount more on a $/ft2 basis due to the use of different code and the increased fire & safety systems.  Over 5 units is full commercial construction, and outside of my knowledge.