Cities are growing, housing is in demand, and everyone keeps talking about how real estate is the thing to invest in. Maybe you started out by renting out the bottom level of your house. Then perhaps you fixed up a different property to sell or rent, and now you’re ready to significantly invest in development.
There can be a significant return on investment (ROI) on apartment buildings in the right areas. But getting started can feel very overwhelming. You’re probably wondering, “How much does it cost to build an apartment complex?” Let’s break it down based on:
- Number of units
- Affordable housing
- Your contracting team
- And more
The Average Costs for Different Scopes
All apartment complexes were not created equal. So it’s impossible to stamp a universal price on every single new apartment building. The average range of apartment construction costs varies greatly between $4.7 million to $52 million per complex.
The national average for a 5-story, 50-unit mid-rise apartment building is $11 million.
Complexes on the low end (like a basic duplex) average around $950,000, while the high end can run up to $104 million for a massive luxury high-rise apartment.
The average cost per square foot (including labor) is:
- Low-rise buildings: $150-$240
- Mid-rise buildings: $185-$270
- High-rise buildings: $235-$450+
Another way to factor the cost of an apartment building is by unit. The average cost runs from $65,000 to $86,000 per unit. Keep in mind that the numbers in this scenario don’t include labor costs or site improvements.
6 Factors Included in the Final Cost
Unfortunately, the cost of building an apartment complex varies greatly depending on numerous factors. Size, location, permits, and more can all impact the final cost of your construction project. Let’s take a look at 6 factors that are included in the cost breakdown.
1) Location, Location, Location
Location is everything in the real estate world. Many people would rather have the worst house in a great area than a fantastic house in an undesirable area. Factors that make a location more desirable include:
- Proximity to bodies of water
- Numerous local restaurants
- Proximity to schools
- Quiet noise levels
- Highway access
It will always cost more to live in popular neighborhoods, so it will always cost more to build in them, too.
Different cities as a whole have varied costs of living. For example, it will be incredibly expensive to construct an apartment building in New York City, but much more affordable to build in Oklahoma City.
2) Number of Units
Earlier, we shared the average cost of apartment buildings per unit. It’s simple to conclude that the more units an apartment complex has, the higher the final price will be. A low-rise apartment building with 18 units will cost much less than a high-rise building with 200 units.
Every 10 stories or so increases the cost to build because high-rise apartments must be designed to resist potential earthquakes and strong winds. While a larger building with more units will always be much more expensive to build, there’s potential for a higher ROI as well.
3) Affordable Housing vs. Luxury Apartments
There are different categories of apartments you can build. The two most prominent categories are affordable housing and luxury apartments, with everything else falling in the middle. The kicker is that affordable housing can also be a luxury building!
The construction costs for each category are pretty similar, it just comes down to any extra “luxury” amenities that you offer. Affordable housing has income-restricted lower rent, and some cities have inclusionary zoning policies.
These policies require or encourage private developers to include a number of units with rent below market rate in desirable neighborhoods. Building affordable housing often comes with tax incentives.
4) Working With an Architect & Contractor
In order to build a wonderful apartment complex, you’ll need to work with an architect and contractor. You’ll work with interior designers, plumbers, electricians, and more along the way as well. Since you’ll be paying for labor costs, you want to be sure that you’re working with experts in the construction industry.
Your architect will:
- Work with you and the general contractor to establish a budget
- Create the building design and draft floor plans and blueprints
- Work with structural engineers
- Incorporate all details about fixtures, materials, and systems
- Obtaining permits (A construction manager can also serve in this capacity)
Your general contractor will:
- Provide the services and materials required for the construction
- Hire subcontractors
- Suggest ideas to the architect
- Pull all permits for work and utilities
- Do a final cleanup of the entire work site
5) Furnishings in Each Unit
Even if apartment units come “unfurnished,” meaning the tenant needs to supply their own couch, bed, and other items, each unit still needs to be furnished to a base level. And these furnishings are more than most people realize at first.
Apartment furnishings include:
- Bath fixtures
- Built-in appliances (Refrigerator, stove, microwave, etc)
- Exterior finish and trim
- Heating and cooling systems
- Interior finish and trim
- Lighting fixtures
- Plumbing fixtures
- And more
Accounting for all the necessary furnishings, utilities, and amenities will add to your final cost.
6) Zoning & Building Permits
In some cases, you can buy a permitted site which is a piece of land someone else already obtained all the approvals to build apartments on. If the site isn’t already permitted for multifamily units, it can sometimes be easy to secure a zoning permit, and other times it can be an uphill battle.
Be sure to do your research about obtaining a zoning permit for multifamily units before purchasing a piece of land. Zoning and building permits don’t usually cost that much in the grand scheme of things, so they typically won’t affect your final price too much. But, they’re still something to account for in the process.
Work With APX on Your Apartment Complex
You want the process of building an apartment complex to go as smoothly as possible. While many general contractors are notorious for going over budget and getting behind schedule, our team at APX Construction Group always goes above and beyond to ensure we stay on track with your wishes.
From general contracting to construction management to design-build services, APX has everything you could ever need to build a fantastic apartment complex. Contact us today to learn how we can help you get started!