50 percent rule for new construction to rent?

[James H.]

I am contemplating the viability of building a garage apartment for rent. It would be about 600 SF, in a nice neighborhood and within walking distance to the local (very large) university. The tenant base would either be students or possibly single professionals.

Comps would be hard to pin down, but I think it would not be too difficult to rent the place for 650/month plus a surcharge for utilities (no separate meter). Apartments in complexes range from about 400/month to 800/month for 1 bedrooms around the university.

Based on a rent price of 650/month, I am trying to figure out what limits should be put on construction costs. I have made a conceptual estimate of about 70 to 80K to contract the entire project out.