First small Development, 4plex, or 4 townhomes?

[Andrew Kiefer]

Hey BP Family. I wanted to ask for advice from small developers in the forum, to see, what makes more sense as your first smalldevelopment, something like a 4plex, or bigger type of small MF, or like 4+ townhomes in a row? Either strategy, build to rent or build to sell.. and why you make one decision over another ? Also, where would you start first? Discovery and due diligence, finding the land, the design and plans of what you want to build , financing , etc? In which order? I was thinking getting the plans for the project I have in mind and then find the right land for it , etc....

[Mike Wood]

@Andrew Kiefer  I think your talking about apples and oranges when you ask about 2-4unit and 5+unit builds. With my banks, I need 25% of total costs for a construction loan, which on 2-4 unit builds is manageable, but 5+ unit builds the amount of capital required gets big fast.

I totally disagree on getting plans first.  I doubt that you will find the right piece of land for a project, if you have already set what the building will be like.  I always find the land first, determine its suitability for my needs (zoning, valuations, rental rates) then develop the plans to suit the lot.  Doing it the opposite way will likely waste time and money, and require you to find a unicorn lot for you predesigned build.

If you strategy is to build to rent, than you should focus on that. Why muddy the waters with some spec builds?  I would recommend starting with smaller builds.  Its unlikely that you will find a bank to fund a construction loan on a 5+ unit without some build experience.  It will be alot easier to get a bank to fund a $250-400k 2-4 unit than a $1.1m 10 unit, just less risk for the bank on the 2-4 unit and much more exit strategies for the bank in the event of a default.