Anyone own a 6plex in Alberta?

[Courtney Hammond]

Hi,

I’m working on a possible investment build and it looks like the property would best be used as a 6plex building. We haven’t nailed down all the details yet, but I’m looking for any insight into the following:

1) should we do common utilities? Instead of each unit with their own furnace/hwt? I’m guessing the cost is significantly less if it was a common system... anyone have recent costs?

2) If we choose a common system, heat and water would be included in rent.. so when working on the proforma... I’m at a loss in knowing or even guessing what utilities would cost on a 6plex.. anyone have some insights as to what I should run the numbers at? (They would be mostly 3bed 2 bath units based on the blueprint we are currently running with)

We are also still on the fence if we will hold the building or sell them off individually... at the moment I’m leaning toward pulling in investors that want the long term hold structure... that being said- should we condominiumize it now... or only if we are going to sell them off right away? Anyone know an estimate on that?


Thanks for reading!! And helping!


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[alaas1977]

I own a 4 flex with separate furnaces hwt's etc and I love it. If I was to build I would install separate, just for the fact that in the end its more money in your pocket, less utility costs etc, plus this would be a lot easier to sell each unit, perhaps sell a few and keep a couple with the profits you made on the sale of the others. Please note i'm not a builder but I do hate having to pay utilities

Lisa

 

[Martin1968]

Between deciding to hold or sell the building, if condominimised for individual sale, just know that at current this market is saturated (Alberta) and not easy. Would think build and hold is best.

In any case I would advise to have all utilities separately metered. if not, I think an average number for water/sewer and gas per apartment is a minimum $200.00 per month for a total of 1200.00 or $14400 annually. (Excl gas assuming these are individually metered)
To me it would be worth the extra investment. But you would want to have it priced out by contractor. Just ask for separate quotes.

Definetly would advise to have laundry hookups in each unit.

Just like post above I source properties with all utilities separately metered for optimum cash flow.
Only exception is sometimes looking at buildings with water included but still an extra cost. (But don't have any)

Hope this helps.

 

[Martin1968]

Meant to say ......(excl electric assuming these are individually metered)

 

[Matt Crowley]

Just a few thoughts
- separate utilities for all units, you don't want common area. This is very standard for townhome (?) project. I can't imagine this is a 1980s style flat 6 flex with basement units.
- what are your build costs per unit? Rents?
- what are comparable units selling at? Why build?

 

[Tom Kenny]

In a scenario where the utilities are part of rent, how does a landlord protect themselves from people who mine bitcoins or somehow otherwise consume oversized amounts of resources? Do you just put kWh limitations right into the lease?

 

[Courtney Hammond]

Just a few thoughts
- separate utilities for all units, you don't want common area. This is very standard for townhome (?) project. I can't imagine this is a 1980s style flat 6 flex with basement units.
- what are your build costs per unit? Rents?
- what are comparable units selling at? Why build?

We haven’t decided on the exact style yet, we were hoping that it would be 6 townhouses but there isn’t enough room with the setbacks. So we are looking into a bunch of options, currently in the city there are basement unit/townhouse above style that are selling well and are popular. (I wasn’t expecting that)

Because we don’t know what we are building I don’t have all the numbers yet (we also haven’t bought the land as this is still part of my due diligence.) However- we are looking to build because my brother is a builder so everything can be done at cost, and he has several trades that are looking to work - so it is a good time to build. Even with the lowest rents posted, or the lowest comp sold we are well within strong returns.




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[Courtney Hammond]

In a scenario where the utilities are part of rent, how does a landlord protect themselves from people who mine bitcoins or somehow otherwise consume oversized amounts of resources? Do you just put kWh limitations right into the lease?

Normally the electric is separately metered, and just the gas and water is common.


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[Courtney Hammond]

- what are your build costs per unit? Rents?

Our high budget cost to build is about $140,000 a unit, and the low end of sales is $160,000 the high end is $220,000 based on the same sqft, bed/bath count and/or style.

Rents for similar units range from $1000-1450 depending on what’s included, and unit style. The average unit that is at least moderately updated but not necessarily new is $1250. I’ve run the numbers from $1000- 1350 in my proforma

- what are comparable units selling at? Why build?




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[Thomas Beyer]

In a newly built complex sub-meter EVERYTHING: water, gas, electricity.

Why would you even consider common utilities ? The only price difference is the meter.

Run the numbers. Newly built rentals not a slam dunk. Tough to finance or is this lined up already ?


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[Courtney Hammond]

In a newly built complex sub-meter EVERYTHING: water, gas, electricity.

Why would you even consider common utilities ? The only price difference is the meter.

Run the numbers. Newly built rentals not a slam dunk. Tough to finance or is this lined up already ?


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Thanks Thomas! Personally I’ve always thought submetering was the best way to go, but since I’ve never actually built a multi family I wanted to see what those who actually own them would say.

We’ve ran the numbers multiple times now- so far they are strong with lots of room to be “wrong”. (I’m not big on the “it should sell” or “it should rent” numbers... and try to run the costs high and the payout low. However we are still working on the costs. Some of the profit margin is in the fact that the land price per unit is low, and the build would be done at cost.

Financing- we have the ability to pull in partners and cover the costs if we thought that was the best option, we are looking into financing now just to see what that would look like.


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[Matt Crowley]

Courtney Hammond:

"Our high budget cost to build is about $140,000 a unit, and the low end of sales is $160,000 the high end is $220,000 based on the same sqft, bed/bath count and/or style."​

This is not tight enough... need to work on your comps, way to big a range. Is $140k cost with land, soft costs, construction, everything? How many SF per unit average? Does that include Realtor costs? Construction financing?

Courtney Hammond:
Rents for similar units range from $1000-1450 depending on what’s included, and unit style. The average unit that is at least moderately updated but not necessarily new is $1250. I’ve run the numbers from $1000- 1350 in my proforma​

If your all-in build costs are $140,000 / unit then you will be building into 6% - 8.7% cap... again way too big a range. You need to tighten up your rents a lot, $450 range is going to capture almost everything in the market. Narrow it down to $100.

8.7% cap is probably okay if in a decent location, I'm assuming this is in a secondary market.

 

[Courtney Hammond]

Courtney Hammond:

"Our high budget cost to build is about $140,000 a unit, and the low end of sales is $160,000 the high end is $220,000 based on the same sqft, bed/bath count and/or style."​

This is not tight enough... need to work on your comps, way to big a range. Is $140k cost with land, soft costs, construction, everything? How many SF per unit average? Does that include Realtor costs? Construction financing?

Courtney Hammond:
Rents for similar units range from $1000-1450 depending on what’s included, and unit style. The average unit that is at least moderately updated but not necessarily new is $1250. I’ve run the numbers from $1000- 1350 in my proforma​

If your all-in build costs are $140,000 / unit then you will be building into 6% - 8.7% cap... again way too big a range. You need to tighten up your rents a lot, $450 range is going to capture almost everything in the market. Narrow it down to $100.

8.7% cap is probably okay if in a decent location, I'm assuming this is in a secondary market.

Thanks Matt

Once we actually settle on what we are building the numbers will tighten up. As the comparable products is what is dictating the range.

I’ll post back once we nail that down if it looks like we are moving forward.


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[Matt Crowley]

Just FYI... usually this is done before land acquisition. Selling this to a sophisticated investor as a development package is going to be a tough one.

 

[Thomas Beyer]

What else have you built before ? Like baking, sailing or knitting building is a skillset that takes many years to perfect !

 

[Courtney Hammond]

Just FYI... usually this is done before land acquisition. Selling this to a sophisticated investor as a development package is going to be a tough one.

We haven’t bought the land. Which is why I don’t have the answers yet. It would be developed and held within my company, or sold off as individual units. We are currently just running numbers, when we hit the question of separate utilities or not.


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[Courtney Hammond]

What else have you built before ? Like baking, sailing or knitting building is a skillset that takes many years to perfect !

My brother has built all of it before, he started in multi family, then townhouses/duplexes, his company has spent the last 6 year mostly building single family with a few duplexes. His father in-law has been building multi family for decades, and has a well established business.

We haven’t personally done a project yet- so it would be our first development to sell.

I have been doing rentals for 3 years, specializing in legal suites homes.

My brother wants to build and sell, I want to make sure that the numbers make sense for both so all doors are open.

The current numbers we are working on all provide a large of margin of error. However until we’ve nailed down the build we won’t know. Originally we were building a 6row townhouse... but then the City called back and there is an additional setback for future road development which takes out that option.




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[Martin1968]

What else have you built before ? Like baking, sailing or knitting building is a skillset that takes many years to perfect !

True......however there is a first time for everything. If you can surround yourself with the right people (knowledge) then you are on your way. It wouldn't stop me from trying something new.
If I would have known years ago with with I have learned in the process I would do a few things differently.

 

[Cory Sperle]

Why would you want to build when you could purchase a multi family project at a fraction of the cost?

 

[Thomas Beyer]

True......however there is a first time for everything. If you can surround yourself with the right people (knowledge) then you are on your way. It wouldn't stop me from trying something new.
If I would have known years ago with with I have learned in the process I would do a few things differently.

Learning, exercising, relationship building and losing weight are 4 of a few things that cannot be delegated ! What else ?