2021 42 units new construction build- 3 story Garden Style.

[Chris Blackburn]

Investment Info:

Large multi-family (5+ units) other investment in Salem.

Purchase price: $361,800
Cash invested: $600,000

42 units (Garden Style) (woody walkups)
Sq ft 31250
Average size 744 sq ft
Price per ft $181.66
Cost (Build Cost) $7,040,516.11
20% Down of cost $1,408,103.22
80% of cost $5,632,412.89
85% Appraisel Value at 5.25% Cap $7,165,260.72
Total Cost Per Door
$150,735.79
Build Cost Per Door
$125,640.55 (Construction)
We are doing a bridge to HUD financing and should be able to pull out ALL of our initial investment at the 85% LTV to then, do a larger project. The 35 years FIXED financing at (currently 3%-4%) is AMAZING. We are excited to offer the same potential to investors in the future (NOTE- interest rates have to stay low for this to work and values need to stay high (and rents). We plan on building 1000 doors of new construction in the next 3-5 years. We are internally well funded and ONLY building simple 3 story walk-up projects on flat ground. No luxury- VERY easy to build with a very solid team of subs. We are the developer, property owner, and construction team. We are only building in the Willamette Valley where the demand is HUGE. Unless Amazon starts "Housing Prime" our value model is very conservative, low risk, and profitable. We work very well with the local jurisdictions and understand the market.

We put in an offer to purchase an unused portion of a church property. It took 3 years of wrangling with the county to get them to change the split zone to multifamily. (so much for the support for more multi-family) We worked (fought) with the neighborhood and built a buffer of 10 home sites around the project to buffer single-family and multi-family. We are currently finishing up framing (do not ask about lumber costs, only doubled, thank goodness. We are building a similar project like our mixed-use at www.keizermetro.com. (but no mixed-used below). We are in the process of using this plan and moving to a panelized steel system for building. If you have read this far.. you really are looking for solutions.. Contact me and I will share all my successes and failures and introduce you to our contractor/installer. The first one will not be easy or cheap BUT as we iron out the wrinkles and incrementally improve 1%-5% each build- it will get better!

What made you interested in investing in this type of deal?

This is our model for the next 10 years. We are working toward several hundred fully entitled doors spread over several projects. Typically we own the land, get the units fully entitled, and build out with our local banks. Units range from 12 units to 120 units. We look for expansion on existing and full land development. Our model is always simple 3 story walk-ups with an 18 unit configuration. (or 12 or 6 if we need space to fit). We build in jurisdictionally friendly areas on flat land.

How did you find this deal and how did you negotiate it?

With this project- we paid the asking price if the owners would walk with us to divide the lot into multifamily. So this was a 3-year walk with only our costs being the money spent with our land planning, zone changes, and community meetings. Our real estate agent was instrumental in helping and buffering the frustration.

How did you finance this deal?

Cash for entitlements, refi on existing property and we broke out 10 resi lots at $110,000 each almost at the same time as closing giving a profit that we could use toward the property or add to one of our QOZF projects to defer taxes. We are using a bridge construction financing to HUD accelerated program for 35-year financing at 85% LTV hoping for rates between 3%-4%.

How did you add value to the deal?

Selling the lots around the units was really not a bad way to make this work even better. I was surprised at the demand for these and these sold very quickly in a bulk sale to a builder.

What was the outcome?

$400,000 cash that more than paid for the land.

Lessons learned? Challenges?

Everything takes 3 years with zone issues. If our plan works- This project should be worth at least $8.5 M. at 85% LTV Should give us $1M-1.2M back in our pocket as a loan (no tax due) that we can go and purchase additional land to do the same thing. $1.2 M will allow us to buy a 3-4 acre, 60-100 buildable unit project. ($200,000-$300,000 per acre with 20+/- doors per acre) The cash flow will be about $6000 a month.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

AJ Nash Tradition RE, Salem Oregon