Looking for some outside opinions from people who have done small multifamily development or BRRRR style projects.
I currently own a property and the vacant lot directly beside it just came up for sale. Lot is around 0.35 acres and already has a driveway/gravel/paved area. Zoning allows up to 3 residential units as-of-right.
Seller may be open to vendor take back financing. I’m thinking something like:
• Purchase price around $70k–$80k
• ~$10k down
• 4–5 year term
• Around 4% interest
The idea would NOT be to build immediately. I’d probably sit on it for 1–2 years while paying it down, then eventually build a triplex once I have more capital.
I also have a contractor that multiple investors I know have used successfully, and his pricing is around $184k per unit all-in for basic modern multifamily construction.
So rough build cost would be:
• ~$552k construction cost
• Plus land + financing + permits/site work/etc.
Projected numbers if/when built:
• 3 units
• Probably targeting rents around $1,850–$1,950/month each
• Basic but modern finishes
• Long term hold strategy
The long-term plan would be:
- Acquire lot with VTB
- Build triplex later
- Stabilize with tenants
- Refinance after completion/appraisal
- Pull out as much capital as possible and repeat
What I’m struggling with is whether carrying land payments for years before building actually makes sense. I’ve never done new construction before, and running the numbers it seems like it may only break even for cash flow. The bigger play seems to be the equity pullout after stabilization/refinance.
Pros I see:
• Adjacent to my existing property
• Control over neighboring lot
• Small multifamily demand seems strong locally
• Potential forced appreciation through development
Cons:
• Negative cash flow until build
• No new construction experience (mostly bought turnkey before)
• Refinance/appraisal risk
• Opportunity cost of tying up capital
Would you:
• Lock it up now because developable land is getting harder to find?
• Or pass and wait until you’re actually ready to build?
Curious what experienced investors/developers would do in this situation.
Building a new Triplex (New Construction)
byu/Top-Inevitable4803 inrealestateinvesting
Posted by Top-Inevitable4803
1 Comment
Interesting spot to be in since land adjacent to your existing property gives you a lot of control over what happens there. That vendor financing looks decent especially if they’re motivated.
One thing to consider though – carrying land payments for 2 years plus opportunity cost might eat into your returns more than expected. Have you looked at what construction loans would look like when you’re ready to build? Sometimes the math works better if you wait until you have more capital ready and can move faster on construction.
The $184k per unit seems reasonable for basic modern builds but material costs have been wild lately so maybe factor in some buffer there. Also worth checking what comparable triplexes are actually selling for in your area after completion – that refinance number is pretty critical to make the whole strategy work.