Multi-Unit Builds Have Solid Investment Potential

Multi-family properties offer a form of residual income after expenses that makes constructing them an attractive long-term vehicle for your investment. However, there are many obstacles to overcome before the building can begin. Luckily, the rewards at the end of the journey justify the time and energy required to do it well.

Here are some things to consider during the planning stages:

What size of building will you be constructing?

There are lots of variables to consider when deciding on the size of the building and how many residential units it will contain. The lot size will dictate some of the physical dimensions, while the size of each unit and height restrictions will dictate the remainder of the building footprint.

What size of building will you be able to manage?

You need to know before you build whether you can manage the building on your own or will have to hire a property manager. It may seem more cost effective to manage the property on your own, but if it turns out to be more than you can handle, it could end up costing more in the long run.

Does the lot you are considering have the proper zoning for the size and type of building you want?

Rezoning can be costly in terms of both time and money. Purchasing a lot that is already appropriately zoned will save you in the long run. You'll need detailed knowledge of your local planning regulations if you decide to rezone, as well as a great deal of patience, as zoning applications are never guaranteed and can have unforeseen costs.

Is the rental market in your region capable of supporting your building once it is completed?

The rental market in your region must be able to support your new building and keep it filled with high-quality, long-term tenants. If the region already has a number of available units, a 24-plex may not be a good option.

Another consideration is market rent; if the rental market is unable to support the price you plan to charge for your units, you may need to rethink either your location or the type of building you are considering.

How will your new community respond to your building once it is completed?

There is more to new construction than proper zoning and finding a lot that will accommodate the building you want. One important aspect of the planning process is considering how the surrounding community will react to the project.

Construction of any kind requires permits and, depending on the local regulations and whether zoning changes are needed, you may be subject to local hearings to publicly debate the merits of your plans. You'll want to know what you'll be facing in terms of community resistance.

How to select the right contractors?

Selecting the right professionals to fulfill your vision can be a daunting task. Your commercial real estate agent can provide you with a list of contractors who have successfully completed similar projects for other clients.