New construction apartments

[Frank Maratta]

Anyone out there ever built an apartment building from the ground up? Can you shed some light on price/sq foot it cost you to build (not including the cost of the land). What type of cash on cash return can I expect from new construction? A few years ago, the small multis I have in my portfolio cash flow around 20-25% cash on cash return. I understand cash flow on new construction probably won’t be anywhere near as high, but it’s something I’m trying to learn more about as all the deals in my area have been non-existent and I have not purchased anything for the past year. How does the loan from the bank work, approval process from the town ect? I’m completely new to new construction, the only expierance I have with the town are simply pulling permits on a few rehabs I have done. What is the best number of units to build per building to be profitable? 12? 16? 20? I only have about $250k in cash available right now.

[Greg Dickerson]

@Frank Maratta The answer to your questions greatly depend on the size shape and topography of the lot and how many units you’re going to build overall. It all starts with the land and you work backwards into it.

The more units you have under one roof the more cost effective it is to build. The number of units per building generally comes down to the site layout parking zone and code requirements etc.

Construction costs are going to start at a minimum of $100 a square foot in most areas for the sticks and bricks that’s for vinyl siding vinyl windows builder grade construction the average right now is about $150 square ft for mid grade product.

Generally cash on cash returns are going to be in the 8 to 10% range and the internal rate of return expectations are 18-30% depending on hold time and exit strategy. 

Again a lot of this depends on the size of the project number of units type of construction etc.

here is a high level overview of the process. 

First you want to interview several commercial general contractors that build the type of building you want to develop so you can get an idea of costs, time frame and requirements.

Next you want to check with the city or county to determine what is required for all approvals including site plan and building permits, proffers, water/sewer tap fees, bonding requirements, inspections and CO process and time frame for all approvals.

You also need to check with the utility companies and get an idea of availability and cost estimates from them for water, sewer, power, gas, cable, installation and connection requirements, tap fees, hookup charges, transformer location and relocation, power line and power pole relocation issues

Check to see if you have to install any manholes, fire hydrants, curb, gutter, sidewalks, street signs, street lighting any specific street design or access requirements,.

Check DOT requirements for access, stop lights and permits, traffic studies

DWQ requirements for permits, permit fees, time frames

This is a broad overview of the process and your civil engineer can handle all of this but it's good for you to know exactly what's required.