All Forum Posts by: Manco Snead

@Manco Snead Unfortunately, that's part of the process. If you just ask a GC or builder, they will give you a high number, as they have no idea what your really asking for. They dont want to give you a low number, only to have that number come in way higher, once they see the plans and bid it. Your also at a disadvantage, since multifamily construction is significantly less than single family (which they should be able to give you ballpark on.

With 2 bedroom units only renting for $1000 each, it likely does not leave much room for the build to work. Your likely looking at 2/1 units being in the 800-1000ft2 per unit, which assuming $100/ft2 build costs, puts you in the $160-200k range for the build, add in soft costs of $25-35k, your into the build for $185-235k, not including land. If you land is not much more than $50k, your total costs are in the $235-285k range (assuming $50k lot), which will likely not cash flow very well with total rents being in the $2000/month range. Given those costs and rent ranges, I am not sure I would be super excited about that build. If your land costs is over $50k per lot, then there is no way I would build.

Now, you might be under estimating the rental income of a new modern unit. This could have dramatic affects on the feasibility of the project. If you can get $1250 (as indicated by @Patrick Britton with his estimate of $1.25/ft2 rent), than the project looks much better.

This all assumes that the existing home sales $/ft2 are higher than these total costs (in the above example with a $50k lot, the total $/ft2 range for the finished project would be in the $142-147/ft2 range). I would shoot for 15% less (i.e. recent sales in the $167-173/ft2), but that's what make sense to me.

Good luck.

Mike,

Thanks for taking the time to lay that out; very helpful to have the perspective of someone with experience, along with some numbers. As you mentioned lot price, the lot we buy would most likely be at least $100K, so I'll be taking that into consideration.

Thanks again.

0 Votes

Originally posted by @Mike Wood:

@Manco Snead Since you stated you plan on living in one of the units, I want to make sure you understand that a construction loan will not be found for less than 20% down of the total cost, maybe even more, depending on the bank you use.

The next thing to consider is will the area support new construction. Take a look at what vacant land is valued at, add in the cost of construction (which for a 2bed/1bath is likely in the $100/ft2 range, larger units would cost less $/ft2), add in your soft costs (permits, design, impact fees, etc). That total cost must be less than what current duplexes are being sold for, if not there is no reason to build.

I also doubt that you will find land that is zoned for building two separate duplexes on the same lot (i.e. four (4) units).

That's great info Mike-- thanks. We are keeping in mind current duplexes vs total cost to build. Coming up with a fairly accurate estimate for construction cost of the duplexes is something I'm trying to figure out as i dont want to pay for plans to present to a GC just to get a number that may end up too high.

0 Votes

Originally posted by @Patrick Britton:

@Manco Snead yeah i've been trying to get those numbers for some time as well and have not had as much luck as i would have hoped. In terms of just the construction, I think that a good starting point might be $90 - $100 per square feet. You'll eventually need to add another $5/SF for architect/engineer, a lump sum like $25,000 for permits (Bellingham is $25k i think, Ferndale is less) and then another $2 - $4/SF for other expenses.

I think you can go to a builder like Faber Construction, Z Construction, Lexxar, etc., and purchase or use existing plans. There is a discount but i cannot tell you exactly how much.

What you might consider doing is calling those builders, as well as contacting Bellingham Builder's Alliance and seeing what they offer.

More great info. Thanks again; very helpful. Wish i had a GC or good architect in the family.

0 Votes

Originally posted by @Patrick Britton:

@Manco Snead I know somebody who is doing exactly that. His situation was a little bit different in that he purchased a single-family home that was already zoned for multifamily, leveled the house and is rebuilding. It's a longer process but like any smart investor, he is outsourcing all of the heavy lifting to professionals (GC's and builders) and has a pretty good timeframe for completion date.

I would make the argument though that a two bedroom duplex should get about $1.25 per square foot, especially if in Bellingham. A new build in Ferndale should get at least $1.15.

While purchasing a lot and building a multifamily is a fantastic idea, especially in the type of market we are in, the amount of time it will take from the purchase of the land to signing the last lease is considerable. I would think at least 16 months, maybe even more... This assumes of course that you are able to find land with the appropriate zoning.

Great information Patrick; thanks. One more early planning component I'm trying to come up with is a fairly accurate estimate of construction costs (referring to the structure only) in order to determine if the numbers will work in terms of final product rental income/mortgage. My conundrum is that, to my understanding, one must have a fairly detailed construction plan in order for a GC to give a fairly accurate estimate, and in order to get the detailed construction plan one must fork out money to have a plan created. I'm trying to avoid paying to just get numbers which would tell me if the plan will work. Any ideas? Thanks again,

0 Votes

Greetings BPers,

Looking for some opinions on building new multi-families to hold as long term rentals and possibly live in one unit. The market where I would build: medium size town with median home price at $331K, average rent for a fairly nice 2 bedroom apartment or duplex at around $1000, a severe rental housing shortage, and zero multi-families currently on the market for sale. The plan: buy a lot and build 2 duplexes on it. I'm not GC and would be hiring out all construction work.

What criteria would you suggest considering to determine if building and holding new, following the above plan, would be a wise choice? Without personally residing in one of the units we would want the properties to cash flow.

Thanks so much.

0 Votes

Thank you both, Marcia and Brandon; those are both very helpful responses.

0 Votes

Greetings all,

I would greatly appreciate some feedback regarding an issue I'm having with my property manager. I own a duplex, which I've hired out the managing of as I live out of the area. Early September, while I was visiting the town where my duplex is located, I noticed a few shingles missing from the roof. I contacted my property manager, he had someone look at, who said the roof looked great but did need a couple shingles replaced (I know for a fact the roof is in good shape; has about 8 years left). I made the mistake of not making the prop. manager commit to a time frame for the repair as he is usually pretty on top of things. Now, a month later, the roof shingles are still not fixed, though he says the repair will happen in the next week.

The issue: the duplex is in the Seattle area, which has been hammered by rain over the last month. So, some of that water may have seeped into the roof from where the missing shingle pieces are. Has anyone had an issue with their prop. manager similar to this? How did/would you handle it in terms of holding the prop. manager accountable for potential roof damage?

Thanks so much.

0 Votes

Thank you for the response Austin; appreciated advice. I'm looking to do this part-time. I'll actually be back in college during this time in Spokane.

0 Votes

Greetings BP members,

I am interested in working with a realtor as an assistant but I am not sure of the best way to approach them or how common this is. My objective is to further educate myself on the real estate world for personal property purchases in the coming years. No intention of starting my own business/real estate company. My real estate experience: I own one multi-family which I have remodeled and managed.

Thank you,

Jesse

0 Votes

Michael,

There are several potential multifamily options for that 50k. One likely one would be a triplex I would try to acquire for $200k. So $150k would be financed. Total gross rents would be $1975. After all monthly expenses PITI, utilities,cap ex,vacancy etc., the property would cash flow at about $250/month.

Thanks

1 Vote

All Forum Posts by: Manco Snead

Manco Snead has started 61 posts and replied 233 times.

Post: Build New vs Buy Old

Post: Build New vs Buy Old

Post: Build New vs Buy Old

Post: Build New vs Buy Old

Post: Build New vs Buy Old

Post: Property Manager Repair Issue

Post: Property Manager Repair Issue

Post: Work as Realtor Assistant

Post: Work as Realtor Assistant

Post: Cash-Out or No-Cash Out Refinance?