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Should I Build Multifamily?

Robert Ceccoli

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I know construction costs are extremely high, but with us being underbuilt in high demand areas, does it make sense to go ahead and build my own multifamily? I understand getting hands on with a construction project can be a pain but I would find it exciting. There are not many multifamily units for sale where I live in the Tyler Texas area , and the ones that are are offered at truly insane prices that would leave me at negative yields for several years. Someone was even trying to sell half a low end duplex for 260k. If cap rates for even low end multifamily are an obnoxiously low 2-4% because there are only like 3 duplexes in my area, would I be able to get a much higher return by building my own? Lumber is extremely expensive right now but I just cannot see myself hitting 170k a door for some of the low quality units I see in my area. Would love to hear thoughts from anybody with experience with this, and if they have some investment focused builders, architects, contractors, etc. that they've had success with and recommend for a multifamily project in East Texas.


Here are some reasons on why it's attractive to me.

-New Unit and material warranties, (more predictable costs)

-Free choice of location with plenty of lots but few multifamily units.

-Value add opportunity on the land through building, my only value add option since most houses in my area have already been thoroughly remodeled before being listed.

-Value add through building more units on the same plot

-Higher energy efficiency with modern design techniques would in my mind mean better long term net income relative to expenses versus a much older building.

-Chance to avoid bad design that I would have to compensate for with renovations. (cell signal dead-zones, asbestos, dumb interior layout)




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