West Seattle New development (5 Town homes)

[Theodor Chung]

Hey BP community,

I’m currently in a deal to develop five townhomes in West Seattle (Seattle, WA) and would really appreciate any feedback, insights, or questions from those of you with development experience.

This is my first ground-up development project, although I’ve been in commercial real estate (specifically retail) for some time now. I’ve partnered with an architect who has 25 years of experience and is well-versed in construction, permitting, and design, which has been invaluable.

Project Background:

This property was previously under contract by another developer for ~1.5 years. During that time, most of the entitlement and permitting work was completed. I’m purchasing the plans, designs, and rights from that developer to pick up where they left off. All rights are being transferred via a formal agreement, and the original architect is willing to continue with us, ensuring continuity.

As of now, we’re about six weeks away from receiving full building permits, as confirmed by both the city and the architect.

My Role:

While my background is more on the investment and sales side, I’ve been underwriting this project as conservatively as possible and leaning heavily on experienced consultants and professionals.

Financing:

I’ve secured a single hard money loan that covers both acquisition and construction, helping reduce total closing fees by avoiding a second closing. To be safe, I also built in extra holding interest, as I may need to tap into a personal line of credit during the project.

Construction Approach:

We’re following a cost-plus structure with our GC:

• $225 per square foot base cost, including sales tax
• GC charges a flat 22% fee on top, bringing it to $275 per square foot
• We will purchase materials directly from vendors and pay subcontractors directly
• The GC uses his relationships to secure competitive pricing on our behalf

This model avoids traditional markup on labor and materials and aligns incentives for quality and cost-efficiency. It’s how he structures all of his projects.

I’d love to get your feedback on:

• Any red flags you see in this approach?
• Thoughts on managing the construction draw process when paying subs/vendors directly?
• Tips for navigating my first ground-up build, especially in Seattle
• General comments on the financing or cost structures.

West Seattle (admiral) California Avenue.

1. Project Overview

- 5 Modern Townhomes | 1,400 SF each | Total: 7,000 SF

- Condominiums on a single plat | Rooftop patios | 1 parking per unit

- Projected Sale Price: $4,200,000 ($600/SF average)

2. Development Costs

- Soft Costs: $230,000

- Hard Costs (@ $225/SF): $1,575,000

- GC Fee (22%): $346,500

- Total Hard Costs: $1,921,500

- Construction Loan Budget: $2.1M -> Reserve Remaining: $178,500

- Total Development Cost: $3,374,937

2.5. Detailed Budget Breakdown

- Purchase Price: $950,000

- Closing Costs: $55,000

- Soft Costs: $230,000

- Hard Costs (Base @ $225/SF): $1,575,000

- GC Fee (22%): $346,500

- Insurance: $4,000

- Draw Fees (Est. 10 draws): $3,000

- Construction Interest (9 months est.): $150,000

- Acquisition Loan Interest (9 months @ 11.75%): $26,437.50

- Monthly Holding Costs (9 @~ $1,000): $9,000

- Refinance Loan Fee: $31,500

- Total Budget: $3,374,937

3. Financing Structure

- Investor Equity: $650,000

- Acquisition Loan: $300,000 @ 11.75%, 9-month interest-only

- Construction Loan: $2,100,000 @ 11.75%, 9-month interest-only

- Total Loaned Capital: $2,400,000

- Total Cash Needed at Closing: $710,000

3.5. Fees & Interest (Estimates)

- Draw Fees: $3,000 (Est. 10 draws @ $300 each)

- Construction Interest: $150,000 (9-month est.)

- Acquisition Interest (9 months): $26,437.50

- Monthly Holding Costs: $1,000 @~ 9 months = $9,000 (taxes, utilities, etc.)

4. Refinance (Post-Construction)

- Refinance Assumption: Permanent conventional loan prior to unit sale

- Loan Fee: 1.5% = $31,500

- Holding Interest (3 months @ 7.5%): $39,375

5. Sales Summary

- Gross Sales: $4,200,000 (5 units @ $600/SF)

- Sales Commission (5%): $210,000

- Closing Costs on Sale: $50,000 ($10K/unit)

- Net Sales Revenue (after fees/hold): $3,900,625

6. Returns

- Total Project Cost: $3,374,937

- Investor Equity: $650,000

- Net Profit: $525,688

- Cash-on-Cash Return: 80.88%

- Equity Multiple: 1.81x

- Return on Equity (ROE): 80.88%

- Return on Investment (ROI): 15.58%