2 acres of dirt by small university

[Mike Knowles]

I'm under contract to buy a 2 acre parcel that is 2 blocks from a small, growing university.  (University of Indianapolis).  It's currently zoned residential and there is a single story house on it that needs demolished.

I've had a conversation with a civil engineering firm that tells me the site is suitable to develop (utilities readily available, etc).  I also went to the Zoning Board and proposed, at a high level, a 3 story complex, with 40-50 units.  They responded today with the following:

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As expected, we discussed your proposed project. There didn’t seem to be objections about increasing the density from the recommendation of the subarea plan. There was, however, concern expressed about access and whether State Avenue would be able to handle the increased traffic.

It was also felt that a three-story complex would not be appropriate within this neighborhood of one-story dwellings. Would it be possible to decrease the height and still maintain the number of units by constructing two, two-story buildings?

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So now it seems I have guidance that something "could" be built there and need to understand if it's economically viable to do so.

I have a good idea of rent comps in the area - there are two other small buildings (39 units, and 56 units) within a couple blocks, both 100% occupied.  For a 900sf 3/2 in the newer/nicer building, rent is about $1,200/month.  ($925 for 728sf 2/2 and $1,450 for 1,050sf 4/2)

I've spoken with a couple local developers to get a feel for construction costs, but am getting a wide range.  Anywhere from $60-90/sf.  In this area of town, one developer told me a cap rate of 7.5 may be attractive to investors.

Any thoughts or advice here?  I own a handful of rentals and have flipped some single family houses, but development is a new animal.

Purchase price of the land is $55k.