Building a small apartment complex in LA

[Jordan Berry]

I have a property that I bought with owner financing. It is currently a laundromat that I also own. The property was recently re-zoned to R-4 with a Q condition that seems like it effectively makes it an R-3. Assuming it is zoned R-3, I can build up to 6 units on the property. My goal is to get this small apartment complex built on the property. Would anyone be willing to point me in the right direction towards some productive first steps toward accomplishing that goal? I haven’t found too many books, blogs, or podcasts about building multi family housing, nor have I met too many people building small apartments in LA at the meet ups I’ve been to. I’m feeling stalled out at the moment and could use a jumpstart. Much obliged.

[Hai Loc]

First of all this is a big project in terms of dollars and time. You can read books but I wouldn't rely on the knowledge you obtain from it to spear head the project yourself. 

First of all you need to know what you are able to build for example 1000 sqft x 6 units

Based on that you need to have a rough idea how much it will cost to build a 6000 sqft. 

Lets use a hypothetical scenario

Lets say it costs $250 sqft for an B class building/units so your construction cost is $1.5m  and another $100k for soft costs, development fees, permits etc..  and your acquisition cost for the land is $400k..  So you are $2m in

Sorry $400k for land cost is way under but just this is hypothetical 

Last I seen the cap rate for multi family in LA is around 3.5-4% on B class

Based on that cap rate you need to make sure the units can net you an NOI between $70-80k.. If you cannot get at least $2000 a unit per month it wouldn't be worth doing because you are essentially paying $2M to build a 6 unit that is valued at $2m..

I would only build if I am gaining equity. This case you are breaking even.. 

Then again I am not familiar with LA rental market but I bet for 1000 sqft new built rental you should be at least $2500 so if that's the case its worth building..

a lot of numbers here. I hope I didn't confuse you but still a lot of other variables involved

In terms of guidance and approvals. We have planners in Toronto that can do a lot of the work in terms of approvals, hire architects etc.. I am sure they have planners in LA as well

You need to hire an architect to draft the building plan to submit to city hall.. But before you do that you need to know if its worth building

Good luck..