Building a multi-family housing can be a thing for people who are into investment and career growth. You’re investing a large sum of money when you build an apartment. That is, with the objective to earn returns from your tenants’ payments.
What about owning an apartment as a career? Well, you actually need to be involved when you own such an asset. After all, you need your tenants to stay for you to keep on earning.
But before you think about the earnings, here is a guide on the cost to build apartments.
Average Apartment Construction Costs
So, how much does it cost to build an apartment? The national average, according to Fixr.com, is about $64,500 to over $86,000 per unit. This price range has the following specifications:
- A unit 861-square feet with a footprint of 24’x35’ (the size of an average apartment)
- Use of mid-range materials
- An apartment with a normal foundation and a full basement
- An apartment with efficient doors and windows
- A labor cost of $125 per square foot (based on national average)
Note that the above national average strictly applies to the apartment’s completion. The price does not include the land acquisition, site improvements, and other additional expenses.
A Closer Look At Costs
The above apartment constructions costs will vary depending on your plans for your housing. To give you some perspective, Fixr.com has listed some estimated totals. The following averages are based on the masonry construction of a three-story unit with 12 apartments:
- Materials: $4.65 million
- Labor: $4.51 million
- Machine costs: $232,000
- Contractor: $1.3 million
The total for constructing the said unit is $9.4 million. Again, the said price does not include the land acquisition and site improvements such as parking, gardens, and play areas.
Where does your money go during the apartment construction? To give you an idea, here is a cost breakdown from CraftsmanBook.com:
- Foundation (9% of total cost)
- Floor structure (12%)
- Walls and exterior finish (12%)
- Roof and cover: 10%
- Windows and doors (5%)
- Interior finish (8%)
- Floor finish (5%)
- Interior features (5%)
- Bath detail (4%)
- Kitchen (8%)
- Electrical (10%)
- Plumbing (12%)
- Masonry walls if used in place of wood or light steel frame (9%)
Also, take note of these other expenses included in the cost to build apartments:
- Permits and utilities
- Plans and specs
You will also need to prepare a budget for an architect and a contractor.
Following are the possible average prices for their services as well as their roles in building your apartment:
Architect ($940 to $1.6 million)
- They will determine the scope of the project and establish a preliminary budget (so, the total construction costs can also depend on their computations)
- They will draft a list of proposed work, budget, and outline of plans
- They will create the schematic design and draft floor plans
- They will finalize the drawings and incorporate all details about materials and finishes, any fixtures or equipment, and all systems in the structure
- They will also serve as the project manager who will review the project plans and obtain necessary permits
Contractor ($125 per square foot)
- They will provide the services and materials needed for the construction
- Their tasks also include hiring subcontractors
- They will deliver the final cleanup of the job site
- They are responsible for the day-to-day management of the project
Note that contractors may also “mark up” their supplies and services. Such charges, as well as indirect fees, can reach as high as $200,000.
Money Saving Tips
It’s true that building an apartment will cost you millions of dollars. But, is there any way for you to save even a little amount of money? Amid all the expenses?
Well, one of the first moves you should consider is hiring an architect who knows how to estimate mid to low-range construction costs. Ask them how you can maximize your money-saving options. And be ready to compromise a little.
It won’t also hurt to look for discounted building supplies. You can actually save a considerable amount if you’re certain on what materials you need and how much you’re willing to pay for them.
Also, consider the future if you’re building your apartment. For instance, building a structure that is energy-efficient will help you reduce the cost of bills that will incur when you already have tenants.
Some of the tips that will help you save money in the future include:
- Install low-flow toilets, faucets, and shower heads to cut down on your water bill.
- Opt for a programmable thermostat to reduce your apartment’s heating bill.
- Install energy-saving bulbs to reduce your electrical bill.
How much does it cost to build an apartment? Millions and millions of dollars. Well, are you still determined to push through despite the costly project costs? If yes, great!
That said, here’s a question you should be asking yourself next: “How much will I earn from running a multi-family housing unit?”
Generally, the income you’d earn will depend on the unit you built. Also, your earnings will be based on any financial obligation you have from building your apartment. Here are some scenarios:
- If you don’t have a debt, your personal income will be the remaining amount after you pay the operational expenses. Of course, the money going in is from the rents of your tenants.
- If you have a mortgage, you can only calculate your returns after you’ve paid it.
Optimizing Your Apartment Earnings
If you calculated the returns and found it revolting (as you think it’s too small), you don’t have to despair. Fortunately, there are ways for you to cut on operational costs (to increase your personal income). Here are some tips from BiggerPockets.com:
- Look for ways to reduce your water bill. For instance, tell your tenants to report leaks and drips ASAP so you can fix them right away.
- Increase your rate. Only, be reasonable when doing so. Also, be aware of rent control laws if you are in a rent-controlled area.
- Add some more to your income by installing laundry facilities or vending machines (or both).
To Build Or Not To Build
Building an apartment can be a painstaking project. It can hurt your schedule and your wallet. However, there’s no way a few inconveniences will stop you. Especially if you’re determined to make your dream multi-family housing unit a reality.
So, to make sure you’re a step closer to success, prepare accordingly. Know that with sufficient funding and careful planning, your apartment business can be a success. Good luck!