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Updated almost 9 years ago on . Most recent reply

User Stats

183
Posts
108
Votes
Chris Blackburn
Pro Member
  • Developer
  • Salem, OR
108
Votes |
183
Posts

Building Townhomes-Salem Oregon 94 Developed lots- build or sell?

Chris Blackburn
Pro Member
  • Developer
  • Salem, OR
Posted

We purchased a townhouse subdivision with all infrastructure completed, (roads, sewer, etc.)  There are 94 fee simple town home lots.  Originally purchase 2012 from a bank, with real estate picking up in our area over the last 2 years, it is time to sell or build.  This is a narrow lot subdivision with the units to have shared walls in groups of 3-6 doors.  (See image).  The project is in S. Salem, (a desirable part of town) and average "house" prices are in the $150-160 a foot for new construction (and rising).  With he recession, only a few subdivisions have been built but a number are in the works.  The lot prices are ranging from $75,000-95,000 for your standard 6000 sq ft-8500 sq ft lot.  NOTE- These are not standard lots- they are town house lots.   A current estimate to build the same project today would cost  about $25,000 a lot? for the hard/soft cost plus around $150,000 an acre  (RM2) land (6 acres) .  Total  ($3,250,000).    The project is across the street from one of the newest Middle schools/ Parks.  Traffic is good.   

We are analyzing the cost benefit of selling the project as to a builder vs building (with a hired builder) ourselves.  We have estimated the build cost at a total build cost (including land, legal, SDC, permits to be at $80-$85+/- a foot.   The other townhouse subdivision project built by Hayden is a few miles away and was not very successful.  (Built in 2007/8 and got caught by the downturn)

The current market for new homes in South Salem is good without a single home under $279,000 (using Redfin).  It would seem that a $225,000 or less town home in this part of town, near good schools and nicely built should sell well.   The units are smaller  (average 1300 sq ft)  at $155 a foot, it still puts the price in the $200,000+ range.  The next "house" that one could buy is starting at the $279,000.  

We really are considering a bulk sale (Although to maximize our price we may have to do a 3-5 phase take down at $45,000 (3 phase) to  $49,000  (5 phase) take down for a builder to digest.

Typically we would do a 1031 exchange even though the market is tight  (no reasonable deals on apartments), but I can usually dig up some dynamic properties with upside based on creative marketing.   Even a 5 phase sale can be used in a 1031 since the original design of this purchase was to invest and sell.  Just finding 5 properties over the next 18 months is challenging.  

The land is zoned RM2 for multifamily (which salem has a lack of (this year) and the project could be converted to a Multifamily 130+/- apartment complex at a rental rate of around $1 a foot.

As well- we could do a hybrid version of this project and reduce the lot numbers to 47 and do a modified attached house with a much larger lot and foot print but still sharing a common wall.

Let me know you can offer any "Wisdom" with a project like this.  If we could get the $2,800,000- $3,500,000 (1031)  for the book sale of the property  vs building it out for $5,000,000-$6,000,000 total profit based on $150+/- a foot.   

Love to hear from others-  Thank you for your time

Chris

I think the net profit numbers are high- units will be 1300+/- sq ft.  Number may be closer to %30   not the %34-%39 shown at the bottom

6 plex

BUILDING PERMITS   (  $97,200.00  single $16,200.00
UTILITIES $0.00 $500.00
EXCAVATION $24,000.00 $4,000.00
GRAVEL $2,500.00 $416.67
CONCRETE PUMP $1,750.00 $250.00
CONCRETE $18,000.00 $3,000.00
FOUNDATION/CONCRETE-LABOR $9,000.00 $1,500.00
CONCRETE CUTTING $750.00 $125.00
SEWER
CONCRETE FLAT WORK $12,000.00 $2,000.00
FRAMING LABOR $21,000.00 $4,947.00
ROOF TRUSSES $14,300.00 $1,831.67
BUILDING MATERIALS $70,000.00 $19,128.40
WINDOWS & SKYLIGHTS $8,500.00 $1,419.38
EXTERIOR DOORS $5,400.00 $1,050.00
ROOF COVER $16,800.00 $2,800.00
GAS FIREPLACE $6,000.00
SIDING LABOR $13,115.00 $2,185.00
GARAGE DOOR $4,914.00 $819.00
GUTTERS $2,400.00 $525.00
PLUMBING $30,000.00 $7,000.00
HEATING $30,000.00 $4,800.00
AIR CONDITIONING $0.00
NEST THERMOSTAT $325.00
GAS BBQ
GAS DRYER
ELECTRICAL $21,000.00 $4,000.00
MASONRY $3,000.00 $500.00
INSULATION $12,000.00 $2,735.00
SHEET ROCK $21,000.00 $7,100.00
SHEET ROCK GYP BOARD $750.00
INTERIOR TRIM $16,500.00 $2,500.00
TRIM LABOR $12,000.00 $2,500.00
SECURITY SYSTEM $900.00
FINISH HARDWARE $2,400.00 $350.00
UNDERLAY LABOR $1,500.00 $250.00
CABINETS $24,000.00 $4,854.40
COUNTERTOPS $11,100.00 $1,850.00
MANTLE $1,200.00
TILE $9,000.00 $1,597.80
VINYL AND FORMICA $3,000.00 $207.43
HARDWOOD FLOORS $6,600.00 $1,138.10
CARPET $13,000.00 $2,110.10
PAINTING $25,200.00 $5,359.25
WATERPROOF DECK $0.00 $0.00
KITCHEN APPLIANCES $8,400.00 $1,400.00
LIGHTS $3,000.00 $500.00
SHOWER DOOR &MIRRORS $3,000.00 $790.00
FINAL CLEANING $2,400.00 $400.00
PICK UP. GARBAGE $4,500.00 $750.00
LANDSCAPING $10,000.00 $1,500.00
DECKS $0.00 $1,000.00
MISC PICK UP LABOR $1,500.00 $250.00
JOB TOILET $720.00 $150.00
PRINTS $0.00
RENTALS $900.00 $100.00
DEMOLITION $0.00
PAVING $0.00
TREE REMOVAL/CONSULTING $0.00
SOIL EROSION
FIRE INSURANCE
LIABILITY INSURANCE $1,200.00
INTERIOR DECRO
OVERHEAD & PROFIT  (Builder)  $30,272.45 $6,033.21
CONTINGENCY 1% $6,054.49 $1,206.64
HARDCOSTS TOTAL $641,775.94 $127,904.05
LOT PRICE $72,000.00 $12,000.00
SUB TOTAL $713,775.94 $139,904.05
REAL ESTATE COMM. $72,540.00 $15,335.70
TOTAL $786,315.94 $155,239.75
SQUARE FOOT 7800 1649
SQUARE FOOT PRICE $82.28 $77.56
ESCROW FEES $6,000.00 $1,000.00
SALES PRICE @ $155 A FOOT? $1,209,000.00 $255,595.00
NET PROFIT $416,684.06 $99,355.25
PERCENT RETURN ON TOTAL 34.47% 38.87%
  • Chris Blackburn
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