New Construction Budget for 3 Unit Multifamily in Cleveland OH

[Rob Strickland]

I bought an existing 3 unit property in Cleveland OH along with the empty lot adjacent to it which I'm looking to build another 3 unit, 1000 sf per unit multifamily on.  The properties are located in the neighborhood of Tremont and I wanted to see if anyone had advice on what the $ per square foot budget should be for this area?  I want to attract high quality tenants so I'm thinking finishes a little on the higher end, but not so far as to surpass what will contribute to increased rent.

[Christian Carson]

Rob,

I think I know the property you bought, if it was on the MLS. Watch the driveway issues since if I remember correctly the garage faces the property line.

If I had control of a lot in Tremont, I would spec build a market-rate contemporary home with an exit price point of $300-350,000. With "modern" open designs and stainless/concrete finishes, building costs can be under $100/square foot. I've heard of the big contractors getting it down to about $70. Take a look at the comps--there's a great set of them in Tremont.

I don't think you'd be able to crack 10% cap on a new build even while asking for premium rents (1500+/unit). The older properties make better rental units since they're much cheaper (<150k). I'd say your money is better spent on a spec build.

Spec building in Cleveland is really exciting. There's a 15-year tax abatement, and demand is really high!