All Forum Posts by: Rylan Lacey

Hello Biggerpockets!

I have a 24 unit apartment community that I am building ground up, and I’m about 4-6 months from finishing construction. All 3 bedroom 2 bath 1,000 sq ft with backyards, stainless steel appliances, washer and dryer in unit. Rents are around $2,000 a month when complete.

I’m looking to get ahead on an idea of financing for this. I usually build small apartment communities and then sell them to investors before they’re finished, but this one I’m planning on keeping.

I’m just looking for some brokers/lenders who would be interested in helping get the best refinancing options available. What are some rates people are getting? Are there 35-40 year amortized loans with 5 year balloons under 7%? Just looking for some good options.

I too get people all day long trying to get me to partner on projects and it’s just not simply worth it.

1. Why would I partner with someone when I can just put down the money on the land and do the project myself? I know land can be hard to come by sometimes but not hard enough for me to rely on a partner. If my capital is too tied up odds are I have enough work lined out for me for the next 12-24 months.

2. The margins are too low, especially on a deal this small. For splitting profits with a partner, I’d have to be doing a deal larger than ones I normally do to help mitigate the risk or cost.

Feels like with partnerships I’m educating my partner on a very niche market, and in doing so I’m cutting 50% of my profit compared to me just doing it without a partner.

I recommend doing it without a partner, hiring a good architect and find a decent builder to build it. Odds are there’s a hard money lender willing to do the deal out there, especially if you’re willing to put more money into the deal.

or if you really want to build this by partnering with a builder, If you owe $95k on a $100k land, when you get a construction loan, the land loan gets absorbed into the construction loan. If you’re both on the loan, you’re both on the hook for that land balance. So pay off the land free and clear with your own money, find a builder willing to partner 50/50 and have him build it for cost. You find the financing together (builder usually has some connections here) and split the money 50/50. His skin in the game is building it for cost and giving you the knowledge and experience to build it, your skin is your land owned free and clear.

Paul summed it up really well above. Parking, turnaround for fire and turnaround for trash are the biggest project killers in Arizona. Honestly if you can get a builder to answer the phone they’re going to be around $150-$175 per sq ft to build (vertical and horizontal) and 6 months out.


Also Financing these are not a walk in the park, especially if you’re new to the game. Expect to put in an additional $30k-40k per unit you build in order to make up the equity required for banks to loan you the money (unless you can cross collateralize other free and clear properties). Then add on payment reserves, points and fees.

You really gotta know your stuff on these things  before you start. That’s why everyone’s in the rehab game and not the new construction game. Takes a lot of risk and cash to make it happen. But once you get in and get some experience, it’s totally worth it.

 I got the project funded with a hard money lender here in Arizona. My actual construction loan was $305,000 for the project plus $30,000 owed on the land, and then the lender allowed me to cash out refinance once the project was nearly complete with a total loan amount of $400,000. So cost per sq ft for underground/utilities, offsites, and buildings came to $102 per sq ft. Im able to get it cheap since im also a licensed GC. Due to increased costs due to covid however I’m right around $125 per sq ft for construction now on my other projects

Thanks Brett,

With the rapid appreciation here in Phoenix I’m hoping the numbers will be even better with the next couple of projects
 

Investment Info:

Small multi-family (2-4 units) other investment in Phoenix.

Purchase price: $58,000
Cash invested: $30,000
Sale price: $800,000

New construction 4 plex, 2 bed 1 bath with private backyards for bottom units. Rents between $1,350-1,450 per unit. Built for $400k including land and sold for $800k

How did you finance this deal?

Private money lender

Hi Biggerpockets,

Just wanted to share a project that I recently completed/sold and go over some numbers about the project.

Bought the lot in 2019 for $58,000 in south Phoenix (7th street and dobbins) and put 50% down and borrowed the rest from a private lender

Built the 4 plex for $400k ($100k per unit)

Asked $750k on the sales price, got $800k with multiple offers in the first week

Each unit is 2 bed 1 bath, 750 sq ft and rents between $1,350-$1,450. Sold around a 6% cap rate so the buyer got a great deal on a new build with warranties and I made a profit I was happy with

I have an 18 unit project going in south Phoenix as well and will update on that project in the coming months.

Hi Biggerpockets,

Just wanted to share a project that I recently completed/sold and go over some numbers about the project.

Bought the lot in 2019 for $58,000 in south Phoenix (7th street and dobbins) and put 50% down and borrowed the rest from a private lender

Built the 4 plex for $400k ($100k per unit) 

Asked $750k on the sales price, got $800k with multiple offers in the first week

Each unit is 2 bed 1 bath, 750 sq ft and rents between $1,350-$1,450. Sold around a 6% cap rate so the buyer got a great deal on a new build with warranties and I made a profit I was happy with

I have an 18 unit project going in south Phoenix as well and will update on that project in the coming months.

I personally like to break it down per unit for non vertical construction. I’m usually plugged in at about $30k per unit for all horizontal work and about $110 per sq ft. However I’m GC and developer so my costs should be lower. I think $135 per sq ft is reasonable for vertical construction but I’d plug in at least $50k per unit for horizontals. Underground companies are outrageously high