?Multi-Family Development Questions (Seattle and Portland) – Micro/Efficiency Units

[Zach Schwarzmiller]

Greetings! I am currently looking into a couple 10+ multi-family development projects in both Seattle and Portland area for Micro or Efficiency Units. They will more so be considered efficiency because they are small but complete units; there are no shared common areas as in the micro-units.

-What % OPEX are these developments able to achieve once stabilized? I am underwriting 25% on my pro-forma but have heard some people getting a little below 20%. I am used to underwriting 35% as average with 30% on the low and 45% on the high depending on vintage, location, utility rates, etc. I bumped it up to 30% for error but I would be curious to know what others are achieving.

-Is anyone doing individual W/S meters? It doesn’t seem to be so, but if they were installed in a couple of my buildings it would be amazing and is ridiculous expensive to try and do now. Everyone is running RUBS programs instead but it just seems like it would be really nice to have the individual meters. On the flip side I haven’t priced out the extra cost of adding 10+ water meters and/or if the City would even consider it, but I know it would be expensive.

-On a 10 year hold is $250/Unit/Year a safe replacement reserves number to use? While it is the appraiser/financers standard accepted national number I find most buildings in my region are more realistically $500-550/Unit/Year.

-Where in Portland and Seattle can I source cheaper apartments if I start building in “bulk” (10+) looking for a complete package of everything if it’s cheaper, but I also don’t mind going to different places if that’s cheaper as well.

-Any Handy-Man recommendations in Portland? Will be looking for 1 to come and clean the common areas and tidy up with a monthly exterior cleanup. There won’t be much, it will all be simple, limited common area and hardscape.

Any suggestions and anything else you’ve run into that I might not consider – greatly appreciated!

Thank You!