Profit and Loss Analysis for multi-family new construction

[Ross Sib]

Hi,

Can someone help to review and comment on my first pro forma estimate below? After running the numbers it seems that my construction costs are too high and are killing the profitability of this potential project. Is my construction cost per sq ft reasonable? After running the numbers I don't understand how other developers near 90004 zip code can pull off similar projects. Perhaps their construction costs are much lower because they have their own construction teams? Would appreciate any feedback, especially from people that are familiar with California construction cost. 

I drafted the following new development pro forma google spreadsheet for a planned new multifamily complex in central Los Angeles :

- 8x 2bd units (underground parking, and 2 levels above ground)

- lot of 7000 sq ft 

- construction cost assumption- $3M (via GC rates: $150/sqft for underground, $250/sqft above ground; numbers provided by LA-based architect)

With a monthly rent of $2800 per unit my projections show net cash flow of only 35K for the whole property after first year of occupancy. It is a very underwhelming return given the large construction cost. 

Thanks!

[Greg Dickerson]

Originally posted by @Ross Sib:

Hi,

Can someone help to review and comment on my first pro forma estimate below? After running the numbers it seems that my construction costs are too high and are killing the profitability of this potential project. Is my construction cost per sq ft reasonable? After running the numbers I don't understand how other developers near 90004 zip code can pull off similar projects. Perhaps their construction costs are much lower because they have their own construction teams? Would appreciate any feedback, especially from people that are familiar with California construction cost. 

I drafted the following new development pro forma google spreadsheet for a planned new multifamily complex in central Los Angeles :

- 8x 2bd units (underground parking, and 2 levels above ground)

- lot of 7000 sq ft 

- construction cost assumption- $3M (via GC rates: $150/sqft for underground, $250/sqft above ground; numbers provided by LA-based architect)

With a monthly rent of $2800 per unit my projections show net cash flow of only 35K for the whole property after first year of occupancy. It is a very underwhelming return given the large construction cost. 

Thanks!

 It is difficult to say without knowing the site requirements, type, style and finish of construction etc but on the surface the cost seem a bit high. You can get cost estimates from builders in the area doing the same type of projects you are looking at but they would need to know where the site is and what's required from that perspective.

Also your operating expenses seem low.