New construction multifamily deal

[Rylan Lacey]

Hi BP,

Just wanted to share a deal I’m doing in regards to new construction multifamily in South Phoenix

20 units, 2 bed 2 bath 800 sq ft

Stainless steel appliances

Stackable front loader washer/dryer

Bottom stories get backyards

Covered parking

$95,000 per unit to build ($1,900,000 total, includes all soft/hard costs except land and closing costs)

Land: $225,000

Rent: $1,250/month per unit ($300,000 annually)

Sale price $200,000 per door ($4,000,000 total)

Total profit after commissions: $1,820,000

Cap rate for buyer: 5.7%

Lined up for almost 80 units next year, just wanted to share one of the deals I put together, develop, and build. I’d love to hear the communities thoughts on a deal like this and if others are doing similar

[Rylan Lacey]

Originally posted by @Jerrod Hill:

Originally posted by @Rylan Lacey:

Originally posted by @Jerrod Hill:

This sounds very great. I'm trying to do something similar but at a FAR lower scale....build a 4 unit multifamily with 3 bedroom/2 bath in each. Trying to learn the process with this and hopefully can scale up. Looking in Ohio. Found a designer/architect for the building, have a builder....now I'm trying to understand the land buying process. Any tips would be great. 

 Hi Jerrod,

Is there anything in particular you’d like to understand about the land buying process?

I have been doing a ton of research. I'm looking for land in Cincinnati, OH. I'm trying to understand a few things: 

1. How do I find land (realtor, auditor site, sheriff)

2. Who do I contact to evaluate land (surveyor, engineer, etc)

3. how do I finance the land. Do I include this in my mortgage for the entire project

4. how do I develop the land if it has trees or other things

5. does it make sense to demolish a old house. If yes, what should I keep in mind

These are some of the things I'm thinking about. 

I always find land off of Zillow or I have MlS access thanks to my awesome realtor. Make sure you understand zoning and unit densities for multifamily in your area, realtors may be able to help with that. Look for some realtors that are trying to sell shovel ready land in your area, sometimes they have some knowledge about land and can point you in the right direction. Always good to use a realtor to help you

For me personally I don’t have anyone check on the land for me. It’s hard for me to rely on someone else to tell me and trust their word on it all being correct. The 3 big things I look for is 1. How close is a sewer tap? 2. How close is the water tap? 3. Is it in a flood zone/plain? That will usually take care of most of your due diligence on the build ability of the land. Usually an experienced architect can help you with things like that but you always want to see for yourself. You can learn all this by making an appointment down at the city for a proper appointment and and they’ll answer all questions you’ll have

Lenders hate lending on land. Unless you have great collateral to put up or have experience in this you usually have to pay cash for the land. Lenders will let you finance 50% but with no experience it’s tough, but it’s doable. I always use hard money for a quick close and leniency, just make sure to use a large one.

G and D/landscape architect can help you along with those things. If the tree is large odds are you gotta pay to relocate otherwise when you grade it you just remove it and haul it off.

You can demolish an old house. Nothing really to look out for on these other than some may have old septic systems that can get in your way, may have to pay extra to remove it because multifamily cannot use septic systems, at least here in Arizona

Hope this helps!