Developing 8 unit apt bldg in Middle TN - Here are my numbers...

[Winston Parks]

Fellow BPers,

I am in commercial RE development of smaller stand alone buildings that at this point are fairly cookie cutter. I have an interest in Multifamily investing; however, to this date I own ZERO investment properties.  I hope to change that with the development (not purchase) of an 8 unit building about 35 minutes outside of Nashville. I feel like I can build for cheaper than buying, running the numbers tells me otherwise. While there are many similarities, I am finding it really different developing MF than what I have been doing. Below are the "back of the napkin" numbers I looked up and some I took a guess. If anyone feels like blasting me then feel free! I will definitely update this post as I learn more and hit the GO button (or not). Thanks in advance for any input. 

Goal: Hold for 5-7 years then trade up. I will not develop property unless it cash flows in year 1.

(.58 acres with 3,000sqft min per dwelling so 8.42 dwellings or 8)

Land Cost: $25,000 ($3,125 per unit) - Hoping this land cost is what gives me an advantage

Construction Costs: $706,270 ($85 psf construction costs) - This isn't a hard quote yet and will be updated once I get it officially quoted. Based on average materials being used (vinyl siding, etc)

• Bldg envelope is 101’-4” x 41 = 4,154.67
• Two Stories = 8,309.33
• Apartment sizes: 993sqft

Soft Costs: $25,000

• Engineering: $5,500
• Architectural: $0 (Not sure if I will need architect yet. I know that <5,000 sqft you do not)
• Legal: $3,500
• Other: $16,000 (Budget for unforeseen issues)

Tap & Capacity Fees: $27,515

• Building Permit Cost: $2,391.17 (estimated $706K total costs)
• Site Plan Review: $224.64 ($100 + $.015 p/ sqft)
• Wastewater Capacity Fee: $750 per unit x 8 = $6,000
• Water Capacity Fee: $750 per unit x 8 = $6,000
• Meters: $300 per x 8 = $2,400
• Water Tap Fees & Install: $300 per unit + 900 installation = $2,400 +900 = $3,300
• Wastewater Tap Fees & Install: $300 per unit + 800 installation = $3,200
• Facilities Tax: $4,000 - ($500 * 8 units, I am assuming this will change as I haven't asked solid numbers )

Total Development Costs: $783,785 (8 units costing $94, 848 each, which I think is high)

Proforma

CF	$ -	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8
Income
Rental Income (Increase 2.5%/yr)	2.50%	$ 79,200.00	$ 81,180.00	$ 83,209.50	$ 85,289.74	$ 87,421.98	$ 89,607.53	$ 91,847.72	$ 94,143.91
Vacancy (10% in Yr1)	5%	$ 7,920.00	$ 4,059.00	$ 4,160.48	$ 4,264.49	$ 4,371.10	$ 4,480.38	$ 4,592.39	$ 4,707.20
Gross Income	$ -	$ 71,280.00	$ 77,121.00	$ 79,049.03	$ 81,025.25	$ 83,050.88	$ 85,127.15	$ 87,255.33	$ 89,436.72
Expenses
Real Estate Taxes	$ -	$ 9,000.00	$ 9,090.00	$ 9,180.90	$ 9,272.71	$ 9,365.44	$ 9,459.09	$ 9,553.68	$ 9,649.22
Insurance	2.50%	$ 3,000.00	$ 3,075	$ 3,152	$ 3,231	$ 3,311	$ 3,394	$ 3,479	$ 3,566
Trash Collection ($250/unit)	1%	$ 2,000.00	$ 2,020	$ 2,071	$ 2,122	$ 2,175	$ 2,230	$ 2,285	$ 2,343
Common Utilities	2.11%	$ 2,400.00	$ 2,451	$ 2,512	$ 2,575	$ 2,639	$ 2,705	$ 2,773	$ 2,842
Management Fee (10%)	10%	$ 7,920.00	$ 8,712	$ 8,930	$ 9,153	$ 9,382	$ 9,616	$ 9,857	$ 10,103
Repairs/Maintenance	3.00%	$ 2,138.40	$ 2,313.63	$ 2,371.47	$ 2,430.76	$ 2,491.53	$ 2,553.81	$ 2,617.66	$ 2,683.10
Turnover/Redecorating	1%	$ 2,000.00	$ 2,020	$ 2,071	$ 2,122	$ 2,175	$ 2,230	$ 2,285	$ 2,343
Snow Removal/Parking lot cleaning	2%	$ 1,500.00	$ 1,530	$ 1,568	$ 1,607	$ 1,648	$ 1,689	$ 1,731	$ 1,774
Landscaping	2%	$ 2,000.00	$ 2,040	$ 2,091	$ 2,143	$ 2,197	$ 2,252	$ 2,308	$ 2,366
Admin Fees	1%	$ 1,200.00	$ 1,212	$ 1,242	$ 1,273	$ 1,305	$ 1,338	$ 1,371	$ 1,406
Total Expenses	$ -	$ 33,158	$ 34,463	$ 35,188	$ 35,930	$ 36,690	$ 37,466	$ 38,261	$ 39,074
Net Operating Income	$ -	$ 38,122	$ 42,658	$ 43,861	$ 45,095	$ 46,361	$ 47,661	$ 48,994	$ 50,362
Property Value @ 8 CAP	$ -	$ 476,520	$ 533,223	$ 548,258	$ 563,686	$ 579,517	$ 595,761	$ 612,428	$ 629,530

Obviously, Once I account for my debt service (DS), say $758,000 @ 5.25% for 240 months ($5,108 p/ month), I am under water.

Year 1 NI [$38,122] - DS [$61,296] = -$23,174 = Meaning I cannot do this project.......