Cost to build a 6 floor 12 units apartment building

[Yunning Lee]

Hi Everyone:

I am new to this forum. This is literally the first discussion I posted here. We are currently under an agreement of a 4-plex of 1million. We are debating whether it is a good idea to buy this property or find a better opportunity.

We can build 6 floor 12 units (2bed, 1 bath, 800-1000sqft per unit) on this lot. What would be the approximate cost to build such an apartment building.

Also, if we decide to go this path, how to estimate the market value of apartment building? I never bought any apartment building before. Is the estimation of apartment building similar to residential house? Residential property usually uses comparison of similar house recently sold in that area. But apartment building is quite difficult to find such comparables. If it costs 3 millions to build and the value of this building is only 4million, then it doesn't make sense to me.

Can anyone give me some opinion or suggestions?

Many thanks!

[Tyson Taylor]

6 floors and a 2000 square foot- footprint?

Elevator, egress stairs, fire resistive construction and probably sprinklers, structural concrete, parking.  It will be expensive.  Your per foot construction costs will be much higher because of all the additional stuff you have to do to go up that high. If you could go bigger, 4-5000sf, then you get some economy of scale (i.e. the cost of the elevator will be spread out over 24 units instead of 12).

Construction costs could be more than $200/ft., so for your 12k sf building you're looking at $2.4M plus the $1M, gets you to $3.4M or $283/sf. all in or more.

Value is all based on current and future cash flow. CAP rates evaluate current cash flow, NPV looks at future cash flow.

No one will be able to tell you whether or not this is a good deal based on the scant information provided (that's not a dig at you, there's just tons to consider in a deal like this). My only advice is to learn enough on your own to know whether or not it's a good deal, when you don't have to ask you'll be ready to jump in.

Good Luck!