Building Apartments

MrFinance

Hi All,

Toying with the idea of building apartments in Cork. Approx. 20-30 apartments. Have land in a fantastic location.

Have a number of questions:

1. Obtaining financing. I'm guessing trying to get 3/4m from a bank would be next to near impossible. Would getting a private investor more suitable in these situations.

2. Cost of building apartments? I'm guessing that 200k per appartment would be an average cost outside of Dublin. Basic apartments. All two bed apartments. One master, one small bedroom.

3. Any other potential pitfalls when pursing the above?

Thanks,

MrFinance

Gumbo

MrFinance wrote: »

Hi All,

Toying with the idea of building apartments in Cork. Approx. 20-30 apartments. Have land in a fantastic location.

Have a number of questions:

1. Obtaining financing. I'm guessing trying to get 3/4m from a bank would be next to near impossible. Would getting a private investor more suitable in these situations.

2. Cost of building apartments? I'm guessing that 200k per appartment would be an average cost outside of Dublin. Basic apartments. All two bed apartments. One master, one small bedroom.

3. Any other potential pitfalls when pursing the above?

Thanks,

MrFinance

No finance until planning is in place is my experience in Dublin.
So I’d say you will have to stump up the planning costs yourself.
You will have to engage a professional team, team, not just a single architect or engineer etc

You will have fire safety application.
Disability access applications.
NZEB compliance.
M&E

First port of call May be to an architect to work out density and design and then approach the planners.

MrFinance

kceire wrote: »

No finance until planning is in place is my experience in Dublin.
So I’d say you will have to stump up the planning costs yourself.
You will have to engage a professional team, team, not just a single architect or engineer etc

You will have fire safety application.
Disability access applications.
NZEB compliance.
M&E

First port of call May be to an architect to work out density and design and then approach the planners.

Thank you for the response. Would be certainly willing to stump planning costs myself.

Regarding average build costs, what is the price per unit in Dublin at the moment? I understand you may not have the figure, just looking at estimates.

dennyk

A 30-unit apartment block is probably not the ideal first project for someone new to the business of real estate development (which I assume you are since you're asking the Internet instead of the experts you ought to be employing to answer these questions for you). Unless you actually do have the necessary experience (or know people who do whose services you can engage) and the financial backing to support it, you may be better off looking for a developer to just buy the land off you.

Deub

What is the plan once the apartments are built?
Do you want to sell or to rent them?
That will impact the cost as it is not the same quality finish.

mickdw

Put some money into developing an outline of the density that can be achieved, land value based on that density and approx overall profits if developed.
I'm sure you will find that the profits from developing it would far outweigh anything else however if you factor in the various risks relating to financing and building such a project, not to mention the risk of economic crash mid development, suddenly a large cheque upfront for sale of the land might look very tempting.

antoinolachtnai

Worth reading.

https://www.scsi.ie/documents/get_lob?id=1338&field=file

It can be tough to make figures really work when you take into account stuff like parking requirements and levies.

Student accommodation might be worth a look too, depending on location.

The advice to sell to a developer at an early stage is likely to be good advice.

Caranica

A block of that size would have to go through the council so you have to factor in the county development plan and legislation regarding mix of unit sizes. I'm pretty sure that 100% 2 bed won't comply.

MrFinance

antoinolachtnai wrote: »

Worth reading.

https://www.scsi.ie/documents/get_lob?id=1338&field=file

It can be tough to make figures really work when you take into account stuff like parking requirements and levies.

Student accommodation might be worth a look too, depending on location.

The advice to sell to a developer at an early stage is likely to be good advice.

Student accomodation is out the window. However, land is approx. 15 min walk from City Centre and on a bus route.

Size of lot is approx .8 of an acre.

I purchased the land for a good price, selling to a developer sounds like a good idea but after the tax, I'd be taking a big hit.

Thank you for the information.

mickdw wrote: »

Put some money into developing an outline of the density that can be achieved, land value based on that density and approx overall profits if developed.
I'm sure you will find that the profits from developing it would far outweigh anything else however if you factor in the various risks relating to financing and building such a project, not to mention the risk of economic crash mid development, suddenly a large cheque upfront for sale of the land might look very tempting.

Agree. I would need to look at various factors prior to even considering moving forward.

This post is to get pointed in the right directon.

Deub wrote: »

What is the plan once the apartments are built?
Do you want to sell or to rent them?
That will impact the cost as it is not the same quality finish.

I'm not looking to sell. I will be renting the units.

dennyk wrote: »

A 30-unit apartment block is probably not the ideal first project for someone new to the business of real estate development (which I assume you are since you're asking the Internet instead of the experts you ought to be employing to answer these questions for you). Unless you actually do have the necessary experience (or know people who do whose services you can engage) and the financial backing to support it, you may be better off looking for a developer to just buy the land off you.

I'm in the financial sector, not the real estate development sector. I have friends who are large developers which I can get advice. However, prior to approaching them I would like further information and to do some homework, as should be the case with anything.

As stated above, selling to a developer is out of the question. Wouldn't be worth my while.

DoozerT6

The apartments may be close to town/bus routes but you still need to make provisions for parking. 20-30 apartments means potentially a lot of cars. Not everybody is willing or able to ditch the motor.

I know nothing about the legalities of building etc, but that is just my layman's thought.

MrFinance

DoozerT6 wrote: »

The apartments may be close to town/bus routes but you still need to make provisions for parking. 20-30 apartments means potentially a lot of cars. Not everybody is willing or able to ditch the motor.

I know nothing about the legalities of building etc, but that is just my layman's thought.

I'd agree, a lot of cars. I note that it would need to be an underground car-park. However, the way the site is laid out, fitting 15 cars out front would not be unreasonable.

heebusjeebus

MrFinance wrote: »

I'd agree, a lot of cars. I note that it would need to be an underground car-park. However, the way the site is laid out, fitting 15 cars out front would not be unreasonable.

Underground car parks in Cork sounds like a disaster with the risk of flooding in the City.

Gumbo

MrFinance wrote: »

Thank you for the response. Would be certainly willing to stump planning costs myself.

Regarding average build costs, what is the price per unit in Dublin at the moment? I understand you may not have the figure, just looking at estimates.

Some say a 2 bed apartment can be built for €250k as part of a large scheme.

sydthebeat

What's the zoning on the land?
What is your part five stragety?

godtabh

Build costs would be around €8m. An architect would charge about €80-100k for planning through construction. An engineer would charge €30-40k through construction.

A planning package would cost in the region of €50-75k easily. Is it in a flood zone?

I work with a lot of developers. Having land doesnt make you a developer. Knowing what to do with the land, knowing how to do it and having the money to do it makes you a developer.

Start small and learn or sub it out to a development company.

godtabh

MrFinance wrote: »

I'd agree, a lot of cars. I note that it would need to be an underground car-park. However, the way the site is laid out, fitting 15 cars out front would not be unreasonable.

An underground car park will cost a fortune to build. Keep it at grade and have an undercroft car park.

antoinolachtnai

You can 'build' for €155k if you really push it. But there are a lot of costs apart from building.

If I were the OP and I wanted to own an apartment block:

- I would sell the site for as much as possible as quickly as possible, getting some level of planning done along the way if it drives the price

- I would use the money as the down-payment on the best apartment block I could find for my money and borrow the rest of the money from the bank (probably a block that is not yet complete, but whose developers need the certainty of a purchaser and cash so they can begin work on their next site).

Developing from scratch will just take too long and require too much talent, hard work and uncertainty.

godtabh

antoinolachtnai wrote: »

You can 'build' for €155k if you really push it. But there are a lot of costs apart from building.

If I were the OP and I wanted to own an apartment block:

- I would sell the site for as much as possible as quickly as possible, getting some level of planning done along the way if it drives the price

- I would use the money as the down-payment on the best apartment block I could find for my money and borrow the rest of the money from the bank (probably a block that is not yet complete, but whose developers need the certainty of a purchaser and cash so they can begin work on their next site).

Developing from scratch will just take too long and require too much talent, hard work and uncertainty.

From what I can see (and have been involved with), costs are arranging from between €225-€275k depending on car park type, density, location and ground conditions.

MrFinance

godtabh wrote: »

Build costs would be around €8m. An architect would charge about €80-100k for planning through construction. An engineer would charge €30-40k through construction.

A planning package would cost in the region of €50-75k easily. Is it in a flood zone?

I work with a lot of developers. Having land doesnt make you a developer. Knowing what to do with the land, knowing how to do it and having the money to do it makes you a developer.

Start small and learn or sub it out to a development company.

Was thinking around the 8m figure myself all in at a max. Obviously, running it closer to 9m wouldn't be feasible. Realisitically, we'd need to turn over in the region of 380k per year.

Not in a flood zone.

Having land certainly doesn't make me a developer. However, I'd be silly not to ask the question.

Thanks for the feedback

heebusjeebus wrote: »

Underground car parks in Cork sounds like a disaster with the risk of flooding in the City.

Just outside the city and the land is elivated so no risk of flooding, thankfully!

godtabh

MrFinance wrote: »

Having land certainly doesn't make me a developer. However, I'd be silly not to ask the question.

That wasn't a slight on you. I've dealt with people similar situations like you and have ruined themselfs. On lad spent €50/60k on preparing an application and never factored in the cost of the application. He had maxed out everything to that point. Had to sell.

Pay good money for good expertise

enricoh

Could you approach a builder and do a profit share?
Too big a jump imo starting from nothing.
If you had a million plus in the bank fair enough.

I know a farmer who built a couple of estates on his land in the celtic tiger and did well out of it but would have had a decent wedge to start with. Plus getting them shifted before the crash helped!

antoinolachtnai

enricoh wrote: »

Could you approach a builder and do a profit share?
Too big a jump imo starting from nothing.
If you had a million plus in the bank fair enough.

I know a farmer who built a couple of estates on his land in the celtic tiger and did well out of it but would have had a decent wedge to start with. Plus getting them shifted before the crash helped!

It was also mostly houses, or two- or three-storey stuff? He did well, but apartment blocks are a whole other level of risk.

drunkmonkey

Aren't they a lot more expensive to build. Would you be better off with a few 3bed semi's, i've no idea of roi vs apartments.

Fol20

You need to walk before you can run.

If you have enough money to play with and other land. It might be better to start with a small project instead of moving straight to a 8/9m apartment complex.

In your situation. You will also need a extremely substantial amount of money to even contemplate building. I would assume in excess of 2/3 million however others with knowledge of that level should be able to give better figures.

Based on 1250 pm for a 2bed. You would need about 25 apartments to generate 380k. Could you squeeze that many apartments on that amount of land?

godtabh

40-45/ha is the min you would be aiming for assuming you’ll end at ABP

SozBbz

This sounds so risky for a novice developer IMO. If you won't continance selling, I think partnering with an experienced developer is the next best option.

On the notion of an underground car park I would only entertain this if absolutely necessary. Is your land in the city center? If not, you'd be better off building at least part of the ground floor on stilts so so speak and so enableing car parking on ground level.

I live in Dublin and a site across the road from the development I live in is currently under construction. Its by a known company of developers with hundreds of millions available to them. They've been stuck digging a hole in the ground for an underground carpark for the guts of a year. Harder rock than anticipated. They have all the skills and experience but still ran into unanticipated difficulty. Now they have the deep pockets to absorb this delay but I could see it absolutely ruining a smaller developer. These apartments are going to be top of the range (expensive) and the market may now have peaked so potentially original profitability calculations may now not materialize due to the delay and the market.