Real Estate Development Costs

[Cate Mee]

Good Afternoon Bigger Pockets,

I have been reading the site for awhile, but first time poster. I am looking for some feedback/advice from the BP Community. My husband and I own a vacant lot near the riverwalk in a highly desirable (A) neighborhood in San Antonio. We are zoned for up to six units on the property, but in researching the cost of construction we have heard anything from 120 a sqft to 185 a sqft plus 200K in land development costs for a new construction multi-family. At 2 million dollars this project would not make sense in regards to ROI for expected rental income. Any suggestions from the BP community on what is realistic? We own the land outright and know the true market value to be around 250K for the lot at the moment. We could build single family up to a six unit. We have been told that the costs to build commercial are significantly higher than those to build single family due to regulation, etc. We have spoken to several GCs as well as several Architects. Any insight is much appreciated.

[Seth Teel]

@Cate Mee - On the residential side the cost of new construction up significantly.  Lumber is up 30%+, flatwork/cement are up over 20% and this was before Hurricane Harvey.  For a commercial project add the cost of steel (which is up as well), the cost of a fire suppression system, then factoring the Hurricane Harvey bump; development costs are already up and will continue to rise significantly.  Additionally, with the City adopting the IBC 2015 and inspectors becoming increasingly difficult to work with, we've labor costs go up and soft cost on the design & engineering side go up as well.   

We recently had a single family infill project bid by several contractors and were blown away at the prices.  We are likely going to GC the project ourselves, just to make the numbers work.  Best of luck to you, but until we see a market correction, the weather calming down, and the price of commodities drop development costs are going to be high. I am having a hard time resigning to this myself.