Considering a townhouse site - new build - as an income complex

[Manny Chehil]

I'm a real estate broker (18 years) just outside of Vancouver BC Canada 🇨🇦 ♥. I own a few properties and have developed a handful over the years through the rezoning process until I receive approvals from my municipality, then I usually sell. My plan is now to generate income producing properties. I do not see much in the multifamily conversations about townhome sites. I'd like to know what experienced investors say about townhome vs apartment as income properties.

Here is my scenario.

I have 2.5 acres that I purchased in 2016 for $3.3m. I'm into it for an addisiontal 600k as interest only mortgage payments.

The City is designating my area as mutifamily 22 units per acre. I would get approximately 50 townhomes on this site. Excellent views, solid location, in one of the fastest growing cities in Canada 🇨🇦.

Normally I would rezone and sell to a developer or JV with the developer on the build and sale of each townhome. But I'm considering just building new townhomes and renting them all out. The city will give me reduced taxes with a 15 year rental covenant and after that each strata title can be sold individually if i would like.

Value of the property without the application. Is now $9.5m. With the approved rezoning application it will value around $12.5m.

This would be a great first property in my income property portfolio. However, why do I not see many townhome sites being discussed as income properties? Am I missing something?

By my calculation I would not need any further cash injections, just a building loan of $12.5m to construct and receive a cap rate of 8% (the area is at 3.5%). So lots of income and tons of equity to borrow from in the future.

Again, am I missing something? Townhomes vs apartments???

Accredited investor wants to know...