Self Taught MBA: From Single to Multifamily Builder - Fine Homebuilding
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Building Business

Building Business


Self Taught MBA: From Single to Multifamily Builder

comments (2) August 16th, 2012 in Blogs
FPR Fernando Pages Ruiz, contributor

Small scale multi-unit buildings, from two to four dwellings, may represent a way to jump-start your construction business.  Click To Enlarge

Small scale multi-unit buildings, from two to four dwellings, may represent a way to jump-start your construction business.  


The transition from single-family to small multifamily builder presents fewer challenges than from homebuilder to remodeler. You use the same designers, the same subs, and even the same mindset.

By small multifamily I mean two to four dwelling units in a building. As soon as you go to five and more dwelling units, you've stepped over a thorny line. You cross from residential to commercial code; you'll need an architect's stamp on your plans; your city may require a commercial contractor's license to build; and most banks regard five or more units as a commercial mortgage, requiring stricter underwriting, and higher interest rates and fees.

Construction-wise, the challenge when building even small multifamily comes with required fire-barrier separations between units. If you've built a house with an attached garage, you know you need 5/8-in., type-X drywall on walls and ceilings directly adjacent to any dwelling area. Fire barrier codes are little stricter when it comes to apartments, but similar to what you've already encountered.

The biggest challenge comes with finding a site. Since new subdivisions generally do not provide land zoned for small apartments, but only for detached and attached single family houses, you generally have to look for lots within the older urban district. This is called "infill" construction and poses some unique challenges in site access and construction staging, as well as utility connections to older service lines, and, in some districts, historical or neighborhood design standards. You can see this as a hassle, or an opportunity to add something of value to the community. If you rise to the challenge of meeting or even exceeding the local design codes, your buildings will be attractive to tenants and easier to sell-even when the value of your multifamily building derives from rents and not esthetics, people are still willing to pay more for something better looking.

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Comments (2)

Edward1234 Edward1234 writes: Great Article. Thank you for posting this. You might be interested in checking out fine luxury homes by Brejnik Fine Homes(www.brejnik.ca). They build fine luxury houses. Brejnik team consists of qualified and trusted: Architects, Interior Designers, Appraisers / Lenders, Trades & Suppliers, Geo-technical engineers, Structural Engineers, Arborists, Landscape Architects, Pool & Water Feature.
Posted: 5:00 am on May 15th

DavidGerstel DavidGerstel writes: Once again, Fernando, real good information, especially for young builders. Like yourself, I was fortunate to get into multi-family units early. I built my first new small multi-family about 36 years ago. I built it in stages and entirely from savings, without a loan, paying as I went in sweat equity and spare cash.
Just the other day I figured out that over the years it has earned me, in rents and appreciation over two million dollars (inflation adjusted to 2012 dollars). It has paid every nickel of my family's basic living expenses. Thereby, it has, in effect, rendered the net operating income from my construction operations and writing into "free cash flow," available for other investment or to support non-profit ventures and fun. And, by the way, I have rented (very carefully) to a lot of great people. To this day I enjoy being a landlord who provides a good home at a fair price. Hopefully, this little tale helps inspire some young builder to create similar good luck for himself.
Please keep your wonderful blogs flowing.
-- David Gerstel --
Posted: 12:16 am on September 29th

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