Turning my SFH to multifamily/apartment building

San Diego, California
Starting Out
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Turning my SFH to multifamily/apartment building

Rachel Murray
Member since 2021 · 3 posts · 1 vote

Hey there BiggerPockets Peeps! Thanks in advance for any help/guidance. Here's our situation. We got lucky and bought a SFH in North Park right before things went wild, so we've got a great interest rate and a steal of a mortgage, considering what folks are dealing with right now. Our property is zoned for 6 stories because we're very close to a commercial street with great public transportation. 99 walk score! I've been toying with the idea of scrapping the building and starting fresh, creating a six-story building with at least six units, one per floor to rent out. Here's the thing. I'm not a developer. And while we have a nice chunk of cash in the bank and can get more with home equity, we certainly don't have enough to pay for the whole thing. So here are my questions. Is this something worth pursuing? Would it be smart to bring in a partner/investor? A friend even suggested friends/family raise for the investment, but since I've never done anything to this scale, it seems like a lot to take on on my own. Though, tbh, it's kind of thrilling. I'd want to hire a design-build firm at the very least, but beyond that, would it make sense to bring in a developer who's done this before? If the latter, who to trust? I'm curious if anyone's done this before and has any thoughts on how to start/move forward. Thanks again!

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Benjamin AakerPro Member
Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
2y
Sounds like a good problem to have! I'm not a developer either, but I have a few general recommendations. Developing is a high upfront cost business. To do well, you need a great plan. To get a great plan, you'll need to front multiple thousands of dollars to design. You'll need city approval even though it sounds like the zoning is favorable. Your first one might even lose money. If you plan on doing more, then maybe take the risk. Otherwise, consider selling it to a developer. You won't make as much but you have a lot less risk. Also, do the math - does demoing your current house + paying off the current mortgage immediately, then getting a construction loan make sense?
If you insist on DIYing it, I'd recommend first calling a few general contractors that you see on the sides of buildings under construction in the area. Tell them your situation and they might be willing to tell you about the process in exchange for a shot at doing the work.
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  • Benjamin AakerPro Member
    Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
    2y
    Sounds like a good problem to have! I'm not a developer either, but I have a few general recommendations. Developing is a high upfront cost business. To do well, you need a great plan. To get a great plan, you'll need to front multiple thousands of dollars to design. You'll need city approval even though it sounds like the zoning is favorable. Your first one might even lose money. If you plan on doing more, then maybe take the risk. Otherwise, consider selling it to a developer. You won't make as much but you have a lot less risk. Also, do the math - does demoing your current house + paying off the current mortgage immediately, then getting a construction loan make sense?
    If you insist on DIYing it, I'd recommend first calling a few general contractors that you see on the sides of buildings under construction in the area. Tell them your situation and they might be willing to tell you about the process in exchange for a shot at doing the work.
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  • Rachel Murray
    OP
    Member since 2021 · 3 posts · 1 vote
    2y

    Thanks so much for the response! Yeah, that would be probably the most logical thing to do since I'm so new to all of it. Working with design-builders can be incredibly expensive. I feel like the only way to do well is if you really know construction or are already in the space. Now I just need to find a developer. :D

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  • Kenny SimpsonBusiness Member
    Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votes
    2y
    Quote from @Rachel Murray:

    Hey there BiggerPockets Peeps! Thanks in advance for any help/guidance. Here's our situation. We got lucky and bought a SFH in North Park right before things went wild, so we've got a great interest rate and a steal of a mortgage, considering what folks are dealing with right now. Our property is zoned for 6 stories because we're very close to a commercial street with great public transportation. 99 walk score! I've been toying with the idea of scrapping the building and starting fresh, creating a six-story building with at least six units, one per floor to rent out. Here's the thing. I'm not a developer. And while we have a nice chunk of cash in the bank and can get more with home equity, we certainly don't have enough to pay for the whole thing. So here are my questions. Is this something worth pursuing? Would it be smart to bring in a partner/investor? A friend even suggested friends/family raise for the investment, but since I've never done anything to this scale, it seems like a lot to take on on my own. Though, tbh, it's kind of thrilling. I'd want to hire a design-build firm at the very least, but beyond that, would it make sense to bring in a developer who's done this before? If the latter, who to trust? I'm curious if anyone's done this before and has any thoughts on how to start/move forward. Thanks again!


     I have a client that took at house and just turned it into 6 units and many other stories like this.  Hit me up if you want to chat and I can do my best to help.  

    [email protected]619-302-2020
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  • Rachel Murray
    OP
    Member since 2021 · 3 posts · 1 vote
    2y

    Ahh interesting, will do Kenny. :) Also, in a surprising twist of fate, a developer's just reached out to me and my neighbors as they're looking to turn this whole block into apartment buildings, I think. The house across the street from us sold at $1365/sqft (bananas), which means, if I were to do the math, we could possibly sell our home today for $1.8M... if we wait another few years, it seems like over $2M is a strong likelihood for a sale price. Rental prices are also bananas here and vacancy rates are super low, so whoever turns this block into apartments is going to do very well. My neighbor and I think our walk-away number for this prime real estate property is $3M. I'm curious if anyone thinks that's reasonable/too low/too high?

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  • Steve Meyers
    Real Estate Agent · San Diego, CA · Member since 2015 · 190 posts · 77 votes
    2y

    @Rachel Murray I know some investors who would be open to a partnership on helping you develop your lot if that is something you want to do.  Send me a PM and we can chat more about it.

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  • Brian Koons
    San Diego, CA · Member since 2019 · 48 posts · 44 votes
    2y

    Rachel, 

    I currently have several builds I'm going through (about 31 units) in the san diego area, and I run the development team for ADU Geeks. I would love to chat about the property and see what type of options you have based on the zoning/buildability and your goals.

    Feel free to reach out!

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