All Forum Posts by: Scott Choppin

@Mike Wood

Great questions. 

1. Apartments sales values are always a function of comps, at least related to appraisals that are used by buyers to finance their deals. On small projects I would agree that cap rates are less commonly used by buyer. We are working on larger projects - 15 to 30 as an example, where cap rates would be commonly used by buyers. On smaller projects, we often we see folks using a GRM. But comparable are used in all cases related to the appraisal process.

Now the tricky part for my entire career has been, when you are a developer offering a residential project that has not been done before, or you are offering new housing in a market that has not seen development for a long time. This has been typical for us over nearly 20 years of developing in the urban environment, where there is just not a lot of good comps. This is true now for our UTH offer where we are building in low and middle income urban neighborhoods. We do have our own sales comps (projects that we built and sold and know the exact value as a function of the rents and NOI).

2. Question for your: What are you seeing that you would say are "nicer details" that add costs? Just a small amount of detail about those things can help me answer your question more effectively. Our UTH model works by building a very simple Type V, slab on grade product, on an already zoned site, delivering a vanilla residential product. This is where the cost savings really are found. We are able to cost effectively deliver items such as granite countertops, but these are the market standard for all affordable housing in CA these days anyways. As well, any buyer of our projects would expect no less, and therefore helps in our projects sales conversation with the potential new owner. 

We are renting units at rents based on true moderate incomes. We ground this by referring to the CA State HCD website which says "moderate" is defined as 80-120% of area median income for the county in which the project is located. On rents we are comparing our rents to the CA TCAC tax credit project rents for 2017, where the LA County 100% area median income rents for 5 bedrooms is $2,884 per month. This puts us squarely in the moderate income category.

3. On bedroom sizes, we really try to stay at or above 10x10, sometimes one of the bedrooms does go below that, but usually one and not all. Recall that our goals is to deliver true affordable housing to larger, dual, and multi-generational urban families. We have to refine every cost component to make this both affordable at moderate income and viable for private equity returns. 

Let me know what other questions you might have. 

Thanks, Scott

@Nicholas F.

Good morning, some questions in order to be of help.

1. Have you run a proforma generally? I realize you are seeking build costs, but have you run any numbers so far?

2. I note you are in the COLA, is the site zoned correctly for your proposed use?

3. Have you discussed the design of the project with an architect? The design will influence the costs, so that question is critical. 

4. How did you arrive at the decision that subterranean is required? There are some critical reasons to make this decision with great care. 

Take a look at this thread, where we wrote about the lifecycle of a development deal, this may be valuable for you: https://www.biggerpockets.com/forums/44/topics/427144-lifecycle-of-a-ca-multi-family-development-deal

Finally, we are an offer of help, our company provides real estate development consulting, and we can absolutely help you with your process. Send me a direct message/colleague request and we can set up a call. 

Scott

@Sam Cain

What did you end up doing on your deal?

Thanks @Tyler Resnick. Nice to hear how this helps folks.

Thanks @Will F., appreciate the positive feedback.

@Matthieu Benoot

Take a look at my real estate development thread, this will give you a great base of knowledge.

Scott

@Sam Cain

Hi there, sounds like a good time to start your education about becoming a real estate developer, take a look at my real estate development thread, which will give you a fantastic start to what you need to do to move your project forward. 

Just curious, why do you need to buy the storefront? Does your site have street frontage? My instinct is to not wait, unless the store guy will sell now, but a "first right" only says when they sell you have first shot. That could be in 50 years. You don't want to wait, time is you enemy. Denver Metro is exceptionally hot right now (we entitled and sold a major apartment land parcel to Lennar). You want to get going. 

Just find an architect who has small multifamily experience, design your three units, and move ahead, forget the other property, you could be waiting and miss the market.

My thread outlines the development process on a small project similar to yours from your description. Take a look and give us a report on what and how you are doing.

Good luck.

Scott

Design development set for Cedar and explanation of timing of plan production and plan check schedules

Generally, the plans were produced on the following time line:

1. Kick off architect - March 29th

2. Delivery of DD set - March 31st (this is fast, as we had already worked on the design previously to formal start)

3. Deliver of 1st plan check submittal - April 27th

4. Receipt of 1st plan check comments from Building Department - June 13th. These were the last correction sets to be received, we also received as follows:

Planning

Fire

Mechanical

Electrical

Plumbing

LID (Low Impact Development) - water quality control, detention and filtering systems

Grading

Regarding resubmittal after receiving 1st submittal plan check comment, we decided to do a major redesign of the layout of the project. This is not preferable, but much cheaper to do on paper than to make the changes in the field later. Basically, the City of Long Beach was going to require us to install a new fire hydrant within 150 feet of our site, which would require significant underground fire line work in the public right of way (street). Given the smaller size of this project, we felt it best to complete the redesign, which removed the need for the new hydrant. It also accomplished removal of the 2nd floor common area deck and associated handicap lift. These were both able to be removed based on the new design.

We are also coordinating the following separate plan review and comments processes:

Water department review of water system design, including domestic water line, fire sprinkler line and detector check assembly, and public works alley dedication design. The city of Long Beach has a long term master plan that requires dedication of land for sites that connect with alley ways. This dedication is requiresd on both N/S  and E/W alleys, although the amount of the dedicated land area differs depending on which one you to which you connect.

We expect to make our 2nd submittal this week and depending on the city, expect 2nd plan check comments sometime in September. We are hopeful that we can start construction in October of this year.

Cedar developed plans and elevations - final.pdf

One more.....

Interesting article about financing land development deals, with some new structures I have not see before:

http://www.jdsupra.com/legalnews/15-creative-ways-large-real-estate-97822/