Complete Cost Breakdown of Building A New Construction Apartment 

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Hopefully he remembers plumbing and hvac on the next building

@coreyfranco7060 Over rated.

He also left out utilities and sewer/trash service. Factoring in ALL the expenses I don't see him netting very much at all - especially considering the debt he is carrying on it. As for "doubling" every ten years, yeah that's just nonsense. He's actually upside down on it now based on his real cap rate.

Everything is new! He does the property mgt! Tennants pay for garbage!

@@PB111627 people break things, common areas need cleaning

@PB111627 He does NOT do the property management. You can see who the property manager is on a streamer in front of the building advertising vacancies. And it doesn't matter if a property is new, it still has to be MAINTAINED and is no longer "new" the moment a tenant moves in and starts wearing things out and breaking things. And WRONG AGAIN about tenants paying for their own garbage lol. In Seattle only landlords can open water, sewer and garbage accounts for their buildings. Anything else you want to be wrong about? Lol.

@@jaydeeare285 So what about if you own your own property whose do you get to open the water, sewer and garbage seeing that in Seattle only landlords can open these accounts? The appliances can be written off over their use period? Just because their is a sign you assume they are doing the maintenance? Maybe he is being paid for that advertising?

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Seems like the math is wrong but I don't really know much about this

It’s a 3.8 rate that’s fixed for 10 years but it’s amortized for 30 years. It’s a 10/20 loan very common in the commercial loan market.

monthly payment number is correct, just checked. it's a 10 yr loan, with Amortization Period of 30 yr.

@@tonyyao2498 Ok awesome, I did not know that. What would the payment look like then after the 10 years?

@@FranciscoLopez-tp2vi close to the end of the term , borrower can renew with the bank , but it will be a new term and new rates

It gets even less favorable when you account for ALL of the expenses, like management fees, a 25% vacancy factor, etc.

My pleasure and I’m glad you liked it

@@ThachNguyendo you pay the morgue once it’s completed? Or do you have to pay durring the building process

Yea he forgot that

He gives a $700 common area cost. I don't envision any running costs for the landlord other than a nominal amount for electricity for lights and a couple cameras/security systems. Should'nt be any staff on the site regularly. Maybe cleaning a couple times a month. That expense is so little at this point in the building.

Now in Vancouver BC we are allow to build a 3-level duplex (left and right and basement unit by each side) on a single residential lot 33 ft frontage by 120 ft deep, which can accommodate up to 4 families.

I'm not familiar with having a firewall in a single duplex. At that point, it's just two separate single-family homes?

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how many times do you wanna calculate management fee? also new buildings have as little as 5% management fee, theyre built to be efficient and digitized with minimal daily management input. btw just based off inflation, his rent will increase by 1.5x in 10 years . which means the property value will nealry double , since the NOI will improve at a faster rate than the rent. if you dont understand it, you shouldnt be underwriting and analyzing real estate. 10 years from now too, his loan will be paid down to 2.5 million, building will be worth atleast 10 million, his all in was 500k, he sells and walks away with 6 million +, lets even assume he makes 0 cashflow, and all the cashflow was used as reserve for maintainance. explain to me how CD will turn from 500k to 6 million in 10 years

@@danielmankinde1706 You're literally just pulling numbers out of thin air, dude. Unlike you , my numbers are based on what the going rates actually are for these things now, and not pie in the sky nonsense that you're posting on everybody's comments. And for the record I literally laughed out loud when you said this building is going to be worth 10m in ten years. 🤣🤣 He'll be lucky if it's worth what he has into it now by then, as it is it is probably worth only about 3M now with his current REAL cap rate and interest rates and not the imaginary ones you keep trying to tpost all over the place. He's in a pretty big hole right now and commercial property is doing horribly right now wirb very little demand, doesn't matter where it is. Should have just bought a 5% treasury with that 500k.

if you read what i wrote and you have the brains to understand , you will see the rationale in my numbers. YOU claimed he will have 10% in management, i literally showed you similar property in SAME MArket going for 5-6% management fee, then why would a brand new MICRO units even cost more, no parking, no lawn. little to no common areas to maintain. NO one underwrites at 10% vacancy too, the price listed is what is readily affordable, if these units were 3k per studio, id say maybe, buy at 1200.!!!! people literally rent master beds and pay 1500 in that area, so it makes NO sense why youd anticipate that level of Vacancy for a BRAND New structure! Commercial real estate is valued by the rent ( free cashflow ) it generates and the ability to secure funding below the selling cap rate. Unless there's an underlying value add play His loan is 3.8 Percent, most commercial Loans are NON recourse and ASSUMABLE !!! which means a new owner can take over his loan, The loans are not due on sale like most residential loans, the borrower of the loan simply changes , the rates and terms don't change. hence the building can sell are a much lower cap rate or a higher value than what the "market rate" is , Infact that even makes the property more desirable, should he be interested in selling. almost NO one has a 3.8% interest rate in this present market. the least new loan you can get is 5.5% for the best properties and lowest Loan to Value , if he ever listed the building for sale today, he would EASILY find a buyer who will be willing to come take over his loan and put 2 million + as down payment, but if he did so, what else is there to buy outside at a higher interest rate, especially when he has only 500k in the deal?, so it makes sense for him not to sell. it also seems he has some form of tax abatement for the taxes to be less than 6k for that type of building, so why sell when you can cashflow and do a REVERSE 1031 exchange later. You're clearly someone who wishes to make such return, but cant wrap your head at the possibility of someone else doing such. so to make yourself feel better you want convince yourself that its a bad deal. 3.6 million loan at 3.8 percent is 16.7k a mo, at todays rate of 6.298% (200 Basis point above 10 year yield of 4.298), that same 3.6 million loan will be 22k a mo, see the difference? @@JaydogRules-q6w

...and $500k in mortgage payment carrying costs for 2.5 years.

What upkeep? It's a small 31-unit building. You don't have a full-time staff member cleaning and doing maintenance like in a 300+ unit building. You maybe spend an hour each week cleaning and the occasional maintenance, but in a brand new 31-micro-unit building I doubt there is much maintenance right now.

Indeed

Well the mortgage is fixed for 10 years but amortized for 30 so the payment he said is about right, but the cash flow is not. For him, with all of his expenses, not just the PITI, he's probably putting 1-3k in his pocket a month net. Is that a worthwhile return for what was put into it ? No. And I can't think of any scenario where it would make sense for another investor to come in and buy it. I imagine if he really thought he could get 6.3M for that building (he couldn't) he would unload it in a heartbeat. The project certainly looked a lot better when it was started 3 years ago, but now 4.1M in that building doesn't pencil out in the current interest rate environment. The 31 units with only street parking is also going to hurt your rents and drastically shrink your tenant pool. Just because the city lets you build something like that with absolutely no parking doesn't mean you should. No parking is an automatic functional obsolescence, as is a building with nothing but small studio apartments. Tenant turnover will be very high.

you clearly dont know math, 3.6 million AMMORTIZED FOR 30 YEARS, which means your payment schedule is as if you have a 30 year loan, however the loan is due on year 10!!!. thats 17k a mo in mortgage, 6-7k a mo goes to tax, insurance and others and he collects 40k in rent, while cashflowing 16-17k a month for 10 years !! 10 years time , he will have paid down the principal of the loan down from 3.6 to about 2.5 million, disregarding his future view of how much it will be worth in 10 years, if rent increases by 50 dollar per year per unit, and average rent of 1700 at year 10, property at that stage will be easily worth 9-10 million based on the NEW rental income, he can chose to pay off the 2.5 million loan by selling or simply refinancing any bank will be dying to have such refinance, its extremely low risk, 10 year old property , 28% loan to value? not to even mention cashflow of 180k a year for 10 years. 1.8 million mhmn now think again, thats a poor return?

lol i dont think you know the area, just like newyork, people pay 1600 for 1 room in a shared apartment , no parking no nothing. its commute hub!! its not meant for people with cars, its for student, younger people, work from home kinda stuff. if you think he did such a poor job, why dont you build yours make the parking and lets see if its financially feasible @@jacinedelarosa6302

why will he sell off the property when he has a 3.8 % interest rate? and it cashflows 17k a mo, make it make sense.. in 3 years he will get all his money back, anything left in there icing on the cake for him, also with real estate investors do you think they want to be liquid? if they all liquidated their assets, they'd have a huge tax bill , so at every time, they always want to own something, his breakdown for 33 units 40k a mo. , checks out which is 1200/1300 per unit and thats very fair , people in shared apartment pay more for a master bed intact area , so which would you rather have . a master bed for $1500, or your own mini suite for $1300 mortgage- 3.6 million at 3.8% 17k a mo. +6-7k a mo. in tax , insurance he probaly self manages the property. so explain how his cashflow isnt 17k a mo as he said and is now 1-3k a mo? explain how 14k a mo, 144k a year is going to. i think you dont want to come to terms with the fact that someone has done such fantastic project and is making such returns @@jacinedelarosa6302

@Thach Nguyen , what a privelage. Thank you for taking the time to get back to me, I would definitely tune in and contact you. Best Regards Dietrich

I agree 100%. That’s why building micro apartments with no parking make more sense these day for me than building luxury apartments.

​@@ThachNguyen I don't know if you did a video on this because this is the first video of yours that I viewed. I want to know about your team to get a project like this done. Also what is the best way to contact you?

Just as ridiculous as assuming your property is going to quadruple every twenty years lol.

Oh, and that thing's not worth six million if it only nets a hundred and eighty thousand a year. Better find a new market at those cap rates lol

Somebody did a more complete breakdown of the total actial costs in the comments and it looks like he might be about breaking even on it. Unfortunately I don't think the place is worth what he has into it. But that's my opinion.

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Each unit is less than. 300 sqft with no parking. 🤣

I am currently working on something similar too, 280-380 sqft studios , and my projected rents are 1100 a unit, to maximize value ,it just makes perfect sense to have micro units , a 2 bed with 1k sqft, wont rent for more than 1600 in my market , that same space takes 3 microstudios that will fetch 1100 each

@@danielmankinde1706can I just ask. How did you obtain funding? Unless this all from the pocket.

NO one develops with cash from pocket, even if you have the cash, its not wise to do so, theyre a lot of equity capital, and senior lenders will offer financing based on the value of the project and the experience of the team. so if you can find the right deal, find the right team. the money will find you. Pref equity, mezzanine debt, JV equity capital@@BANGA2TIMEZ

@@BANGA2TIMEZ it's called a construction loan, some banks/lenders ask for 10% down, some 20%, some 30%. There's 10+ ways to get qualified

Usually it starts as soon as you get the loan, but some loans have the option to finance the payments for a while.

He has been paying on it the past 2.5 years but he didn't and he didn't mention it as one of his costs , even though it was his largest one at another 500k+ expense.

You can do the breakdown your self. A little research go a long way. Before construction move forward a estimator calculate the building materials & labor cost. Imagine a apart is 20×40 ft

@uberdash007 I have a 1 acre piece of land right next to my 6-unit apartment building that is zoned for multi-family in Apache Junction Arizona. I have never done ground-up construction. I've only purchased existing multi-family that had a value-add play where I remodeled the interior and exterior of the property. Where would you go about doing research and estimating to find out the total construction cost from ground up? Called the local city zoning office. they said for one acre that is zoned rm2 you can build up to 20 units then there are setbacks and parking

Hello, could you reference where he mentions this? Thanks 🙏🏽

@@jonathanlarios5218last 3 minutes of the video

I don’t know where you live and I can’t speak about where you live but I know Seattle market very well I’ve been building residential and apartment building for a long time 30 years. Of course the higher interest rate for buyer does affect the price of a building. However there is a massive shortage of a apartment building in the Seattle market so it’s a sellers market than a buyer market now especially in a good area

It would take the bill to 5M to make the parking garage

@@Yuvraj. that'd be worth the $200 a month for me.

@@MattEatsMochi but it may not pencil out on the investment side of things.

@@Yuvraj. oh it absolutely didn't, which is why he didn't go with an on-site garage.

Yes, most commercial loans are setup 10-year balloon, refinancing before the loan matures into another 10 year loan.

...and maintenance, and landscaping, and city taxes and licensing, and trash service and sewer service, etc etc. I'd like to know all these things as well , because in a building of that size and units that runs well into 4 figures more a month and I wouldn't be surprised if they were AT LEAST another 6k-8k- a month just for the utilities and maintenance.

Yeah there is no way those are real numbers

new buildings usually have tax abatement for atleast 5 years. where the property tax is on the previous value and not the new value

Keep in mind these are micro units. So no range, dishwasher, in-unit washer, etc.

make units smaller, Rent per sqft goes up when units are smaller, thats why he build micro studios all less than 300 sqft, renting for 1200 each, if it were a 2 bed 2 bath 1,000 sqft . he probably cant get more than 2500 rent with NO parking

He is.