Last year, apartment construction was down by 12%, partially due to the global pandemic. Despite this, sales of homes and apartments were up. This unique situation is waiting to be capitalized on, but how do you make the first move?
The obvious solution is to build your own housing. Read on as we answer the questions “How much does it cost to build apartments?”.
The cost to build apartments is $10.5 million USD or 8.9 million euros. This is an average based on a five-story, fifty-unit building.
Table of Contents
Hard and Soft Costs
Building apartments and their related costs can be broken down into two areas. These are hard and soft costs.
Hard costs are the physical materials and labor needed for the project. They may include materials, the land, building the foundation and internal systems, fitting, and fixtures.
Soft costs are the administrative areas associated with building the property. These include permits, development rights, legal fees, and the hiring of an architect. Fees in this area may increase if problems like planning permissions or opposition to development come into question.
One of the biggest costs and most important aspects will be procuring the right land for your apartment complex. You can expect to spend around 10% to 20% of the whole budget on the right land, depending upon the place you are building in. The land will also be impacted by the laws of supply and demand, so expect to pay more in attractive areas experiencing growth.
Construction materials have always been a large part of any budget for construction. However, basic material costs are now rising even quicker. This is due to new emerging markets across the world.
Wood, steel, and concrete are your main concerns. But apartments also need wiring, plumbing, and HVAC, which all add to the price.
When sourcing materials, also bear in mind a national labor shortage, both in the US and Europe. You may find that recruiting builders is tougher or more costly than you imagine.
Contractor and Architect Fees
A trustworthy, reliable contractor will be worth their weight in gold. They oversee the general operation of the project. A contractor will manage day-to-day goings-on, sourcing materials, hiring staff, and obtaining permits.
The contractor will be in charge of keeping to the budget. You can expect their fee to be around 25% of the building’s total costs. This will often start at around $200,000 or €170,000.
An architect will be responsible for the planning of the project and does much more than just the design. They will decide upon the budget along with the work plan and list. Their services will amount to between 10% to 17% of the overall project cost.
Choosing a Rise Size
The design and structure of your building will be in one of three rise sizes. These are low, medium, and high. Each will have an impact on the cost and revenue you can make.
Low-rise buildings have one to three floors. Constructed from wood, they usually have a capacity of five to fifty units. They often have double corridors, two stairwells, and elevators.
Mid-rise apartment buildings have around ten floors. This can house 50 to 200 units. They may also have other amenities built into them, such as communal laundry rooms, gymnasiums, or even have shops.
These apartments have a steel foundation. On top of this are wood and concrete construction.
High-rise buildings are over twelve floors. Each floor will contain between four to twenty different sized apartments. They may also have added amenities for residents built into them.
When building high-rise apartments, you need to pre-check zoning laws. These dictate how high the building can be.
Compliance and Development
There is a huge amount of building compliances you have to take into account to make your facility habitable and people can start owning apartments you have built. These include accessibility, fire safety, and other regulations. One-third of the total cost of the building itself (not the whole project) can be taken up by this.
Other laws will depend on the country and state you are in. Building laws and regulations can vary drastically. Generally, some kind of permit and permission will have to be acquired from the local authority.
Cost by Square Foot
One way to assess the building is not by individual costs but by the average price per square foot. This helps to get a general idea of the overall cost by size, as opposed to totaling individual elements.
Price per square footage increases depending upon the rise of the building. For low-rise apartments, you can expect to pay $125 to $225 USD on average. This equates to around €100 to €200.
A mid-rise apartment will be $175 to $250 on average or €150 to €210. Noticeably, this is not a huge increase from a low-rise apartment.
Finally, a high rise is the most expensive. This will cost $225 to $400 and upwards, around €190 to €350 or more.
Keep in mind that these are very approximate estimations that can vary widely based on geography. For example, you are unlikely to build a low-rise apartment in New York or Switzerland for $125 per square foot.
One way to build while lowering costs is to use prefabricated buildings. These come ready to build, lowering soft costs like architect fees. All you need to do is source a piece of land to put it on, then find a team to put it up.
These types of buildings can start at around $125 or €100 per square foot. They are ideal for small builds with lower budgets.
When it comes to financing an apartment block, unless you have a lot of capital spare, your main option is a loan. Luckily, most banks will offer a loan program for building, particularly if you have experience. Each bank or credit union will have its own terms or conditions, so make sure you check them carefully.
Your other option is to find investors. These can be private individuals known as angel investors or companies looking to invest. Even crowdfunding is used for apartment buildings in some instances.
How Much Does It Cost to Build Apartments?
Now you can answer the question, “How much does it cost to build apartments?” you can work out a cost. This will then need to be adjusted depending on the location you are building in.
Looking for inspiration and advice on how to furnish your apartment block? Then let Room Impact help. Visit our blog here to see all our ideas on interior design and how to make your new build rooms look fantastic!