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How Much Does It Cost to Build a 20-Unit Apartment Complex?
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Building a 20-unit apartment complex can be a great investment opportunity for real estate developers. However, the cost of construction can vary depending on various factors. In this article, we’ll take a closer look at the costs involved in building a 20-unit apartment complex and provide you with a rough estimate of what to expect.
Location
The location of the apartment complex plays a significant role in determining the cost of construction. The cost of land, labor, and materials can vary depending on the city, state, or country where you plan to build the apartment complex. For instance, building a 20-unit apartment complex in New York City will cost significantly more than building the same complex in a smaller town.
Construction Cost
Construction costs are the most significant part of the overall cost of building an apartment complex. The costs of construction can vary depending on the materials used, the size of the units, and the amenities provided. Typically, the construction cost per square foot for a mid-rise apartment building ranges from $150 to $225.
These costs can vary widely depending on a range of factors, including the materials used, the size of the units, and the amenities provided.
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Materials
One of the most significant factors that influence construction costs is the choice of materials. The materials used can range from standard to high-end finishes, with each option having a different cost. For example, using hardwood flooring, granite countertops, and stainless steel appliances will add to the construction costs compared to using cheaper materials.
Unit Size
Another factor that can influence construction costs is the size of the units. Larger units generally cost more to build than smaller units due to the additional materials and labor required. The number of bedrooms and bathrooms in each unit can also impact the construction costs.
Amenities
Providing amenities can be a great way to attract tenants, but they also add to the construction costs. Some popular amenities for apartment complexes include a fitness center, a swimming pool, a community room, and a rooftop deck. The choice of amenities will depend on the target market and the competition in the area.
Land Cost
The cost of land is another significant factor in determining the overall cost of building an apartment complex. The cost of land can vary depending on the location, zoning regulations, and availability. The average cost of land for a 20-unit apartment complex is around $350,000 to $500,000.
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Permits & Fees
Permits and fees are an essential part of any construction project. You’ll need to obtain permits and pay fees for building, zoning, and occupancy permits. The cost of permits and fees can vary depending on the city or state where you plan to build the apartment complex. Typically, you can expect to pay around 1-2% of the total construction cost in permits and fees.
Additional Costs
Apart from the construction costs, land costs, and permits, there are additional costs to consider. These include legal fees, architectural fees, engineering fees, and financing costs. Typically, these costs can add up to around 15-20% of the total construction cost.
Based on the above factors, the estimated cost of building a 20-unit apartment complex can range from $3 million to $5 million. However, it’s important to note that this is just a rough estimate, and the actual cost may vary depending on various factors.
For a 20-unit complex, get apartment building cost estimates including per-square-foot breakdowns.
Why Apartment Complex Construction Costs Are Rising?
The multifamily construction sector is currently contending with significant hurdles, primarily arising from a surprising surge in interest rates and escalating construction expenses. The affordable housing segment, in particular, has been heavily impacted, experiencing an average cost rise of approximately 30%. This increase in costs has caught many projects that previously secured low-income housing tax credits since 2019 off guard, resulting in unexpected financial shortfalls. Consequently, numerous developers are now seeking additional funding sources to bridge these financial gaps.
In response to these challenges, developers have adopted a cautious approach and have become more discerning in choosing their projects. They are increasingly turning to collaborations and partnerships, particularly with municipalities that offer soft financing options, as a means to mitigate rising costs. However, even with certain state Housing Finance Agencies (HFAs) providing supplementary credits or soft funding, these measures often fall short of fully addressing the budgetary challenges faced by the industry. This underscores the industry’s pressing need for adaptability and innovative solutions.
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Hard vs. Soft Costs for Multifamily Construction
When estimating or analyzing the costs associated with multifamily construction, it’s crucial to distinguish between hard and soft costs. Hard costs encompass all the expenses directly tied to the physical construction of the building, such as site preparation, foundation work, framing, roofing, plumbing, electrical systems, landscaping, and even the installation of fixtures and appliances.
These are tangible, brick-and-mortar costs that form the backbone of the project budget.
On the other hand, soft costs are typically intangible but equally important. They include expenditures like permit fees, architectural and engineering expenses, legal services, insurance, marketing, interest on construction loans, and project management fees. While they don’t directly contribute to the physical structure, soft costs play a vital role in ensuring the project’s compliance, design quality, and overall success. A clear understanding of both categories allows developers, contractors, and investors to create more accurate budgets and avoid financial surprises during the construction process.
How Much Does Multifamily Development Actually Cost?
The cost of multifamily development can vary considerably, influenced by factors such as location, size, and amenities. However, as of 2023, the average construction cost for a multifamily property in the United States is approximately $350 per square foot. For instance, if you were to build a 100-unit apartment complex with an average unit size of 1,000 square feet, the total cost would amount to around $35 million.
It’s important to note that location plays a significant role in cost variations. Here’s a breakdown for a more accurate estimate:
- National Average: $350 per square foot
- Major Primary Markets (e.g., Manhattan, San Francisco): $450+ per square foot
- Secondary Markets (e.g., Phoenix, Orlando): $300 to $350 per square foot
- Tertiary/Rural Markets: $250 to $300 per square foot
Additionally, when calculating square footage, you should account for unusable space. Unusable space refers to areas within the property that cannot be rented or are completely non-functional. This category includes amenity spaces, lobbies, elevator shafts, stairwells, and the like. Typically, around 15% of the total space in a multifamily building falls into this category. However, it’s advisable to consult your development plans for precise figures.
For a comprehensive overview of construction costs for entire apartment buildings, refer to the following table. These figures represent national averages, and for construction projects in major primary markets like Manhattan, San Francisco, Seattle, and others, anticipate significantly higher costs.
- 4 units: $1.2 to $1.6 million
- 8 units: $2.4 to $3.2 million
- 10 units: $3 to $4 million
- 12 units: $3.6 to $4.8 million
- 20 units: $6 to $8 million
- 50 units: $15 to $20 million
- 200 units: $50 to $100 million
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