Multifamily Value-Add Rehab - Construction/Project Manager?

Question

Hey All - I'm interested in going through with a multifamily value-add project. I've been involved for a few years now on the investing side and have worked with a few developers/owners. However, most of my experience has been within the Acquisitions and Asset Management side of things, with minimal Construction Management experience. I know firsthand how important that skillset is.

I'm planning on purchasing a MF property in the 80-120 unit range with a value-add business plan. In terms of the rehab, I'm shooting for mostly cosmetic rehabs. I won't be splitting up units, moving around plumbing/electric, or anything that is a relatively heavy lift.

However, when dealing with so many units, even on a cosmetic scale, I am fully aware that those mistakes can quickly compound from a cost perspective.

The market I am interested in purchasing is not in my state, and considering that I have limited construction experience, I wanted to explore hiring a construction manager/project manager for a value-add project to handle/oversee everything. What are the costs usually? 5% on total capex/hard costs? How do the terms usually work? Are there better alternatives that may be better? I still plan on coming to visit the property often, but boots on the ground with experience can help dramatically.

Any advice would be greatly appreciated.

Greg Dickerson · Answer

It will not be cost effective to have a project manager handle things over the course of a year. Your property management company will be able to handle things as units turn over. Most of the good ones do this on a regular basis. If you are unable to find a good PM company then you will need a GC to handle the renovations as units turn. You will not be able to get a Project manager for that period only doing 1 or 2 units at a time.

David Elerman · Answer

I'll be purchasing in FL(Tampa area)

My concern is the property management team not having the proper experience and capacity to oversee and coordinate everything. I'd rather pay an extra 5-10% to make sure things are done right and that the materials/construction/labor is done as efficiently as possible.

I would say the time frame would be about a year or so of rehabbing all the units as the leases expire?

Let me know if you think my concern is warranted or not?

Greg Dickerson · Answer

@David Elerman are you using a third party property management company? If so they will manage the project. If not you could turnkey with a GC.

PM fees will depend on the time frame and overall project scope but 5-10% is is the range.

What state are you purchasing in? This can be a factor as well.