New Apartment building

[Sid N.]

I am eyeing a lot in east bay area to build a multi family on a busy street .  the lot is 3000 sq ft and building can go upto 65 ft in height .

how do I know what sq footage can i build ?  Also being in down town i am assuming the utilities would not much much of the cost .

Asking the experts here .. any other warning signs I should be checking so that i don't get surprised after i purchase ? 

[Josh Cuthbertson]

Sid - Go into the local planning department or give them a call. There are too many factors in the local zoning code to list and check. Ask for their planner on call, tell them your idea, and they'll start to list all the contributing factors.

[Tyler Kastelberg]

Sid! Great question. I lived in SF for a few years and know East Bay well. The allowable square footage is going to be tied to the local zoning laws. You can typically find the regulations through a google search. Make sure you develop a solid financial model and plan a significant amount of time for permit reviews. You won't be able to break ground without City approval, which can take months.

Let me know if I can help!

[Andrew Johnson]

@Sid N. I've looked at building (in some cases) but haven't pulled the trigger.  What can be a huge inhibiting factor are the carrying costs.  Not specifically for the "construction" phase when you're talking about permitting, approvals, etc. it can be a lengthy process.  A very lengthy process.  I have small scale developer friends here in San Diego and their rule of thumb is that it will cost $100K and take 1 year before they can break ground.  That might be a little bit hyperbolic but it's worth considering (for you) as I can't imagine that a lot in the Bay Area (even the East Bay) is particularly cheap.  You're servicing that debt (and debt for vacant land is a little different that debt for "purchase money loans") during that entire period.  

That said, I'd imagine that Step 1 is to look into how the lot is zoned.  Is it zoned for multifamily?  How many units?  Some places have different zoning for duplexes vs. other kinds of multifamily properties.  What are the parking requirements?  Let's face it, 3K square feet is a small lot and that doesn't leave much room for parking and the footprint for a building.  Have you had a conversation with a contractor?  Let's say that you do buy the lot, permitting goes well, it's zoned right, you have the money to pay for the construction...the best contractors (in my experience) are usually pretty backed up.  Can that contractor send a crew over tomorrow with shovels to start digging?  Will you have to wait 9 months to break ground while they finish up another project?  I know I was looking at a major rehab project out-of-state and every contractor recommendation I got had a wait of 9+ months.  Major rehabs and ground-up builds aren't exactly projects for Jimmy the handyman :-)  

Your mileage, of course, may vary!  It's also why "shovel ready" vacant lots with pre-approved plans sell for more of a premium than vacant land.  Someone has paid an architect, talked to the city, has the permits, etc.  It takes a ton of risk (and time) out of the deal for the (second) developer.

[Justin R.]

@Sid N. I'm doing two new construction multi-family projects in my neck of the woods at the moment, and @Andrew Johnson isn't being hyperbolic.  There are City specifics that you'll either need to (A) learn or (B) pay someone to know for you, but much of the cost and complexity and time comes from the CA-wide plumbing, fire, mechanical, and other codes.  It's not impossible to work through, but it's expensive and time-consuming for any commercial (3+ attached units) property.

I don't even know where to start on providing advice other than to say ... the more of these I do, the more shocked I am at my naivety when I started.  In reality, the reason I made it to this point is because I started building in a rising market - property appreciation has saved me from my sins, so to speak.

New construction beyond an SFR or duplex isn't for the faint of heart. As one data point, one of my projects involves construction of 4 homes on an existing urban lot already zoned for 4 dwelling units. I'm 15 months and $250k+ in already, and there hasn't been a shovel in the ground. The numbers will work out fine, but that just illustrates why there's a difference in value between land and a shovel-ready project... and why the details of the lot (and surrounding infrastructure) really, really matter when doing stuff like this.

[Sid N.]

Thanks you all for the info . lets see how it goes .

There is also mention of "Easement Needed" . Any idea of what this means ? 

[Tom Gimer]

Originally posted by @Sid N.:

Thanks you all for the info . lets see how it goes .

There is also mention of "Easement Needed" . Any idea of what this means ? 

Parcel may be landlocked and, if so, an agreement with an adjacent parcel to use a portion of said parcel to get access to a public road would be required.

[Vic Reddy]

Originally posted by @Sid N.:

Thanks you all for the info . lets see how it goes .

There is also mention of "Easement Needed" . Any idea of what this means ? 

This particular lot may be landlocked or may need easement for utilities. Either way you will have to negotiate with the adjacent landlord for easement.

If u do go under contract for this lot, make sure you have enough time to work through City approvals and also negotiate for this easement. You don't want to close before site plan approval & easement is agreed by the adjacent land owner.

One of our project required easement for sewer from adjacent landlord and he did not budge for money or any other consideration :(  We had look into alternate more expensive option for sewer.

[Steven Gesis]

Originally posted by @Sid N.:

I am eyeing a lot in east bay area to build a multi family on a busy street .  the lot is 3000 sq ft and building can go upto 65 ft in height .

how do I know what sq footage can i build ?  Also being in down town i am assuming the utilities would not much much of the cost .

Asking the experts here .. any other warning signs I should be checking so that i don't get surprised after i purchase ? 

 Sid, you need to go to planning department, you need to find a reputable engineer in the local market that has a successful track record with this type of lot, location and construction type, can help guide you through the tough areas fairly quickly and also refer you to right people. Dig deep, be diligent. My first new construction project was certainly the most expensive, but once you get through (1) you are on your way, no fear - push forward