Second opinion needed: Should I build a small apartment complex??

Question

Good evening everyone,

My two eldest siblings and I are thinking of joining forces to capitalize on approximately 8K sqft of land behind our mother's home. We've talked about doing something with it for years, but our distinct lives have postponed any actions until now. I understand that engaging in business with family often leads to conflict; however, we've all agreed to abide by legal protocols for the sake of any future misfortunes.

Due to a recent property sale, I hold the most revenue to initiate the process. However, I've recommended that we pursue a bank loan to fund the project and keep my reserves readily available ($250K) in case of an emergency. My brother has contacted a designed planner and received a quote for $35K that covers the planner's fees, property layouts, and some permits. The planner mentioned that his services would also bypass the need for an architect. Other research conducted: our zoning allows us to build 1 dwelling unit for each 1500K sqft.

I've convinced my siblings that a two-story quadruple apartment is our best option (total 8 units). This half of the land will have its own utility connections and its own entrance from a street behind our property. We estimate rent per unit would range between $1,500 - $2,100 (we're currently looking to work with a realtor for a more accurate number). Of course, there are many more details to cover, but just to give you an idea of our intentions, what are some of y'alls thoughts?

Please let me know if there is any information that I can add. Likewise, any mentorship/advice/guidance/criticism is greatly welcomed and appreciated.

Thank you for your time.

Jesse

Nik Moushon · Answer

@Jesse Lopez First, stop talking to that "planner" you have. Anything over a 3 unit (some states 2 units) REQUIRES an architect. If that "planner" doesnt know that; they are an idiot that you dont need on your team. If they do, then they are just trying to play middle man and take more money from you.

Second, go looking for a local-ish (depending on the size of your city) architecture firm that has experience doing MF. They will help figure out exactly what you can build there. Its clear that you don't understand the zoning code well enough to properly determine what you can build on your lot. Dont take that as an insult, zoning codes can be very difficult to understand. They can do a feasibility study for your site to help you determine your options for a small fee, before you actually pay for designs and construction documents.

Third, do not think that just because the zoning says you can have a max number of units per sf or per acre that your site can max that out. There are dozens of variable that will determine what you can fit on the site. At 8,000 sf I would think you could get only 3-4 units on there....and thats pushing it. This is why an architect will be able to help you understand and determine what you can fit. then you can run numbers and see if anything is worth building.

Bjorn Ahlblad · Answer

"1 dwelling unit for each 1500 sq ft" of what exactly? If it is land then your max is 5 units. With all due respect 8000 sq ft is a postage stamp. You need a parking lot, a driveway, space for your building, set backs etc. Whether you get a bank loan or not you'll need a healthy down payment for a construction loan. This is a sizable undertaking and if you have not done this before, well what could possibly go wrong? Good thing is you have @Bruce Woodruff attention he can probably save you a lot of grief. I wish you all the best!

Chris Seveney · Answer

@Jesse Lopez

If zoning is one unit per 1500/sf and you only have 8,000 sf how can you build 8 units? You could get away with 4 (doubt 5 would work because of stacking).

I would hire a planner / architect first to get through schematic design and review with local jurisdiction as well as start to get estimates for construction as it may be cost prohibitive to build.

Also make sure you have all utilities (and sized properly) to property as that could be a significant cost as well.

Bruce Woodruff · Answer

Agree with @Chris Seveney and @Bjorn Ahlblad. There is something about this that doesn't sound right. Have you checked your numbers carefully? Have you had a General Contractor look at your drawings and throw a price at you? There may not be as much money as you think to be had.

Just trying to help......

Bruce Woodruff · Answer

A few questions:

Is your 'planner' going to do the drawings then? I don't see that mentioned

And what about engineering?

What is your estimated total cost as of now?

How long will it take to recover that?

Caleb Bolen · Answer

Hi Jesse,

Have you had any support to identify market rents yet or running any analysis on the deal?  Feel free to reach out, I would be happy to pull some numbers for you.

Caleb

Julie Nealey · Answer

You would also need to have parking. If you only have 8000sq ft lot, you would not have the space for your parking requirements if you plan to max out the site.(Most requirements are per X sq ft. (Of course you could always go underground, but that is a very very expensive and I would not recommend it.)

I wish you luck!

Jesse Lopez · Answer

This is great advice, thank you! However, contacting an architect was our first step. The architect we spoke to advised us to work with a planner to get a design so that he would have something to work with.

Nonetheless, I will definitely take on your recommendation and start by reaching out to at least two other architects.

Thank you for your time and feedback!

Nik Moushon · Answer

An architect that doesnt want to deal with planning isnt an architect you want to work with. This isnt at a scale where that makes sense. Find another architect. The vast majority will want to have that control with the planning. Best of luck.

Jesse Lopez · Answer

Yes, we are currently working with planners to get an expert opinion of what can be built on the piece of land. I also agree with your suggestion about the utilities. I anticipate this portion of the project will require a good portion of the investment.

Thank you for your time and feedback.

Second opinion needed: Should I build a small apartment complex??

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