Estimating New Construction - Small Apartments

[Ali Hashemi]

Hi,

I'm in the process of closing on my second deal. I have an 8-unit apartment and soon 4 duplexes. Both are Class C properties. Because I require lending I struggle to make the numbers work on Class A properties (how do people do it?!).  

I would like to move up from Class C properties this year or next so I'd like to consider building rather than buying. I was told a rough new construction estimate is $80/sqft for a wood frame apartment 4-stories or less and $115/sqft for steel frame. Is this accurate?

Can anyone share/recommend an estimating formula or technique for calculating new construction costs? It would be in Indiana - outside of a city, not in the city. From what I've seen IN/KY/OH/MI/TN/MO/IL are all similar in terms of cost of living / construction.  

Thanks for the help!

ALI

[Bryant Patterson]

The developers you're seeing who sell after achieving full stabilization are more commonly known as merchant builders. I prefer to build the deal, refinance from construction debt to permanent financing, and operate the asset for several years, but that's just my preference.