Cap rate goals on ground up development of multi family

[Charles O.]

I am considering a development project of multi family housing. I am hoping for an increase in equity above the acquisition and development costs, and a cap rate that exceeds what I could get by buying an existing multi family property.

Obviously ground up development is risky, difficult, and time consuming. I’d like to at least have a plan that would return say a 10-15% cap rate to make it worth the effort, vs buying something with say 8% cap rate.

However, I’m having a difficult coming up with that.. I’m not sure development leads to a better cap rate? I would plan on holding the property for 10 years due to opportunity zone tax incentives.

Can anybody share their goals or industry standard expectations around capitalization rate of ground up development compared to a purchase?