Building Multifamily Homes in San Diego

[Christian Konn]

I'm going to have $200,000 in 3 years and want to build multifamily homes in San Diego by either developing on vacant land or demolishing cheaper homes in R4 zones.

Is it possible to get a construction to perm loan in the san diego area with $200,000 in the bank? If so then how much does the typical 4 plex cost to build in this area?

I am an active duty plumber in the navy and bring in about $29,000 a year plus $2100 a month in Basic Allowance for Housing (BAH). I'm saving my BAH to build investment property by renting out a friends room for $400 a month.

I've contacted a shipping container build group and they quoted me $80 - $150 per sqft plus architect, material costs and permit costs.

Would it be better to live in one to get lower interest financing?

Any advice would be appreciated. I'm just getting my feet wet and want to learn all of the ins and outs of building investment properties in the San Diego area. 

[Justin R.]

Lee's right. I've both scraped+developed and re-developed by adding more square or re-zoning and adding swft to create MFR properties within City limits.

It's is extremely expensive and extremely involved and extremely time consuming - it's the reason why practically no private developers build anything close to affordable housing here, and one of the big drivers for our ever-increasing housing and rent prices ... it's hard to believe or understand until you've done it.

Note that the challenges are not the actual vertical construction - once you get to that point, you're fine.  It's...

- Finding a buildable lot that you can get the density on

- Actually getting that lot at a price that works (before someone else does)

- Taking the financial hit to hold the lot while you get entitlement or plans approved

- The flexibility you need to maximize the lot usage with all the requirements (everything ends up being custom)

- Parking, parking, and parking

- If you ran through and SDP to entitle the project, costs for other improvements

- Finding financing for all this so you've got the right money at the right time (or, if you're using your own money, making sure you're getting a return on it at all times)

- Of course, the actual construction

These are a LOT of challenges, and trying to make your way through this is not for the faint of heart.

If you think you've figured out something that others are missing, I say pursue it - that's how success happens - but know that some experienced folks think your failure likelihood is in the 98+ percentile.  I'll be the first to cheer if you succeed.

On your specific question, a bank will want you to contribute 30% of the cost, and (A) large reserves and access to more capital or credit and (B) strong income and (C) experience.  If you don't have all three, you've got a problem.

$200k is a lot of money, but it's not enough to build MFR in SD.

Personally, in your situation, I'd try owner occupying a place and building a detached companion unit out of a container(s) first.  The problems multiply quickly when you build 3 or more units together.

Good luck.