Getting Things to "Pencil-Out"-
I have had several clients over the years that
bought or owned property that may have had just a single family
dwelling on it, that they rented out for extra income, but that was
in a multi-family zone such as R-2 or R-3. This of course
sparks the question as to whether it might be profitable to further
develop the property and add an additional unit or units, further
increasing profitability of the property. I have even gotten
through the necessary Planning Permits for a couple of these
projects. But, when push came to shove, they just didn't
"pencil-out" and were never built, a very common experience for most
architects, and for most first-time real estate developers, I think. This just means that when all of the
necessary costs were figured in, the profitability versus the risks
were just not in the desirable range for most investors
inexperienced in this area. So, for those of you that browse
these pages with this in mind, read on so that you can have some
idea of what you are getting into before committing a lot of time
and money to it. Obviously, these projects are built all the
time, and can certainly be profitable, but you have to know what you
are getting into. No investment is risk-free, and real estate
development can be risky, but also quite profitable.
Permit Process-
The permit process for multi-family projects is
much like that for a new single-family residence, so please review
that article for the
basic steps and requirements. But in this article I will
concentrate on the ways that the process and requirements differ
from single
family projects. One of the main differences from
the start is that owners and contractors who may still be considered
qualified to submit plans for single family residential projects,
and some very limited other types of projects of 4 "units" or less,
will not be allowed to submit plans on their own for larger
projects. Plans for these larger projects will require that
the plans be prepared by a licensed architect and/or engineer.
Density-
Density
is the basic calculation that you will have to make to determine
(roughly, for now) the number of "units" you will be allowed to
build on your proposed site. Once you have come up with this
figure, keep in mind that this is likely higher than the actual
density you will end up with. Often other issues, primarily
parking, will be the final determinate as to how many units may work
on your site.
Parking-
Parking issues such as number of required
spaces per "unit", minimum back-up distances, turning radii, stall
width and lengths, extra spaces for guests, etc. will be one of the
largest determinants as to how and if your proposed project will
work or not. A very general rule of thumb is 300 sq.ft. of
area per parking space, this includes circulation space such as necessary aisles, etc.
Each jurisdiction should have it's own parking standards, some
available
online, but parking design can be considered a whole discipline
in and of itself.
Use Permit-
In all instances that I am aware of, projects
such as these require some kind of
Use Permit,
before you can proceed with your application for a building permit.
From the beginning stages of your design, through to receiving the
Use Permit, you can figure on at least one year and up to two years
(or even more) depending large on-
Environmental Review-
These types of projects are never going to be
Categorically Exempt under CEQA, and thus require, at the very least
an Initial Study and then, at the least, a Negative Declaration.
Environmental review is a whole subject by itself, so see
that article for more
information.
Architectural Review-
Most all projects of this nature and in the
requisite zones will be, at the very least, reviewed by the Architectural
Review Committee (ARC), but may even have to go before the Planning
Commission, depending on size and scope of the project. Any
approvals by the ARC may generally be appealed to the Planning
Commission, or even to the City Council, County Board of
Supervisors, or even in some cases such as those in the Coastal Zone, the
Coastal Commission.
Design & Permitting Costs-
Roughly, at the time of this writing (4/07) you
can figure 7-8% in design & engineering costs, and an additional
7-8% in permit fees of various types, on top of hard construction
costs for projects of this nature. This assumes that there are
no proposed zoning changes to the parcel, and that you are not in an
environmental "hot spot" that might require a complete Environmental
Impact report, as opposed to a Negative or Mitigated Negative
Declaration per CEQA (see link to that article above).
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