Buy vs. build multifamily

[Jeanette Czachur]

Thinking about investing in a multifamily units and wonder if we should consider new construction vs. buying a pre-existing unit.  In a strong rental market for both annual and seasonal.  There are limited used & very dated/ugly properties available in our area for around $200k.  Can build 1800 sq ft duplex 2/2/1 for around $230k and rent for $1200+ annual or $2500 seasonal.   Thinking shiny and new might make sense for buy/hold 10 yr.  Done a couple of SF deals made some $$ but hubby and I essentially newbies educating ourselves & finding our niche looking to expand our RE investments. Actually would like to build one unit and expand to total of 8 duplexes (16 rentals) in a single compound over a period of 5 years.  Looking to supplement retirement-he's retired and I'm still working full time for next 2-5 yrs.   Crazy or not?  

[Bill S.]

@Jeanette Czachur so I know nothing about your area so I will speak in generalities. 

Newbies often miss what is known as soft costs in development which are as follows.

Permits: Does your cost to build include building permits. What about planning and zoning approval? Do you have to prepare drawings to get planning and zoning approval. What about plans for building permits.

Tap Fees: You will need water and sewer to each of the units in the compound. Do your costs include the pipelines from the mains to each unit. Each area is different about what the water and sewer service provider will furnish and what the developer must build pay for and maintain. 

Impact fees: Sometimes if you are building they want you to pay fees for new schools, roads, and drainage.

Site Improvements: Builders give costs to build a building but what about the costs of sidewalks and drainage facilities. Is that included in their number? 

Consultant Fees: You will likely need a surveyor, engineer, architect and perhaps a planner and building permit expediter. 

It's a process that take time to learn. Find someone local that is doing what you want to do and see if they will let you tag along to the meetings they have. You will learn a lot.