New Multifamily Development Analysis

[Joshua McGinnis]

I'm looking at an off-market site with an existing duplex. The site is zoned for 18 units by-right and I've done a quick back-of-the-napkin feasibility in developing the site.

Can someone spot check my analysis and provide feedback? Thanks in advance.

[Nick L.]

You're hitting all the right line items. A few points concern me though:

1. Operating expenses are less than 22% of rents. I get that this is new build but it seems awfully low. I don't know where this development is located but taxes, insurance, repairs and landscaping all look very low. An opex ratio of less than 40% raises questions.

2. Soft costs also look low. 20-25% might be more common. I would suggest breaking this out like you did for expenses. Are you including debt service? 

3. Your hard costs say there will be 12,495 SF. But adding together your units gives 19,100 RSF. No doubt there will be some internal and/or external common areas to be built too. So your math may be thrown off here.

4. I don't see any figures for contingency. Is this built into the hard and soft costs?