New construction apartment building

[Shane Ward]

I found a piece of land (1.6 acres) in a great little town (center of the town) that has been approved for up to 10 units. It has city water, sewer and gas to the street. I’ve been going back and forth about moving forward with this idea. I don’t much about getting financing for this type of project or if it’s the right move. I would love for someone who does this or has done this to talk me in or out of it. I have about 150k of my money to work with but that’s it and some construction knowledge. Any advice would be appreciated.

[Greg Dickerson]

Originally posted by @Shane Ward:

I found a piece of land (1.6 acres) in a great little town (center of the town) that has been approved for up to 10 units. It has city water, sewer and gas to the street. I’ve been going back and forth about moving forward with this idea. I don’t much about getting financing for this type of project or if it’s the right move. I would love for someone who does this or has done this to talk me in or out of it. I have about 150k of my money to work with but that’s it and some construction knowledge. Any advice would be appreciated.

 There are a number of things to consider before you take on a ground up development project. Financing would be done by a local or regional commercial bank and they will lend 60 to 70% of the cost of the project or value which ever is lower. 

You want to start with the end value of the project and work the numbers backwards to see if it makes sense before you go any further. Talk to some local builders to get an idea of costs to build. It also sounds like he will need to raise capital as 150K is not enough to cover permits, down payment, and front end costs etc. for a project like this. Interest and carry cost could be built into the loan.