Adjusting the Density of a Multifamily Development

apartment investing construction process density managed communities multifamily new construction Oct 02, 2021

Sometimes the apartment density that a local city wants might not align with what it needs or what you as the investor need for the real estate investment to make sense. Sometimes things need to change to make a deal work. And sometimes you need to walk away.

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Just because the city wants it or allows it doesn't mean that it's profitable, or what the market needs.

We're giving the city far too much credit there. The more you farm a specific area, the more you're going to realize that there are some cities that are friendly to what you're trying to do and others that it's just a hard stop--you're not going to get anywhere.

We had to let a build-to-rent project go in Caldwell, Idaho, this last week, where they are just not going to give us the density that we need. We can only get quarter-acre lots out of that city and there's not a chance that that kind of density is ever going to come even close to working on a build-to-rent product.

So James, our lead developer on it, he's just going to spin it off to a home builder that deals far more appropriately for a home builder than it is for a build for rent project.

So to Chase's point are you going to be able to get the density that you need? I've got one that we're working on right now. Where to get the density, right. We had to sacrifice parking. What that means is a much higher HOA budget to enforce parking, because you can see that that will be a problem down the line.

I mean that kind of parlays into what we talked about on the last episode was development, layout, and amenities.

Chase Leavitt

And then taking it just a step further, if you really want to dig into it further, is understanding the city and going either going to meetings or everything's online nowadays is listening to those meetings and seen and understanding. Okay, what's coming in? what's getting approved? And what does that unit in floorplan breakdown look like?

Steve Olson

Yeah, yeah, absolutely. I've, I've seen stuff where we've been under construction. And we knew that on our heels was a big luxury class, an apartment community. And so it was tempting, you know, when you hit the market with 200 units over a six or eight-month period, you're under that pressure to get that lease up?

How do I cut my rents and you know, sometimes that's valuable. Sometimes getting units rented at a discount to get stabilized is the most important thing to live to fight another day. But other times, you know, these tenants are going to start seeing units for three, four, or $500 a month more than me, I gotta stick to my guns. I'm just leaving money on the table.

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