Multi-Unit Apartment Building Questions
Los Angeles, CA · Member since 2017 · 1 post · 0 votes
Hi Everyone,
I'm new to this forum. I have few questions regarding the potential development of a multi-unit apartment building in Los Angeles.
1. What's the approximate cost per sq ft to build 3-4 story building with 10-14 units.
2. I'm assuming half the units will be 1bd / 800 sq ft and the other half 2bd / 1,000 sq ft. How much additional square footage should I assume for common space for each unit and what's the approx. cost per sq ft for the common space.
3. I own the land free and clear. Will a bank finance 100% of the construction costs or will they expect me to have a certain percentage of the construction costs?
4. What's the total estimated time from start to finish? I'm in Los Angeles which is not the most construction friendly city in the world.
5. Any suggestions on where to start?
Thanks,
CB
Hi Carlos,
1. Asking the cost psf is like asking "how high is up". If you mean construction cost, the elements of that line item alone is composed of two major sub-line items being hard cost (slab up) and site work which is further bifurcated into on and off site costs. Hard costs are driven by a host of variables as does site cost. If you are defining "all in" cost, you need to add land and soft cost to the analysis. Soft costs are composed of a long list of line items and vary according to the permitting entity to the construction costs themselves. They include items such as legal, architectural, engineering, permitting, entitlements, loan fees and points, development overhead and so on.
2. Common areas can be enclosed or open space and are in turn driven by determining the density of NRA, parking requirements along with non-discretionary common areas (like internal or external circulation) and discretionary common areas such as a gym, laundry/vending machines and swimming pool/spa. All of these are determined by code and market demand. So, you need to define what's mandatory in terms of space usage and what's left that is allowed by code and how you elect to spend that space. In short, you need to do a conceptual design to figure these things out.
3. The bank will most certainly expect you to have a certain % of hard equity in the deal, which is typically around 20 to 30% of the total cost of the project. If your land value holds up to cover this amount, it will be accepted as the same as cash. Also expect to have to personally guarantee the the entire amount of the construction loan.
4. I generally figure a deal like this to happen as if it were a three act play: Act I Planning and entitlements to get to shovel ready, Act II Construction Period and Act III Rent up or sell out. Figure a year for each "Act" for a total 3 year window of time.
5. Start by doing some doodles with a pro forma to determine if you have a viable deal on your hands and if so, get a rough set of plans together to see how the project physically works and if it holds up financially and confirm that it can be permitted in a way that meets market demand.
Feel free to contact me if you need/want more direction.
Good Luck,
Barry