Cost approach on 1 unit of a 2 unit Project (condo's duplex) new construction?

[cdanj]

I've been getting these new construction hard money loan appraisals on 2 Family and three family dwelings that are being built with the intention of each unit being sold as conod units and they want cost approach. Also, I've been using dwellingcost.com
A two family side by side in my market is viewed by the public and treated by the owners as 1/2 duplex, gnerally with the owners having a simple agreement and insuance policy.
So, I guess the cost approach would take the entire exterior measurements and halve them.
But a top/bottom three unit building. Would I do the same and just 1/3 them?

 

[JTip]

Good luck finding land sales with a H&BU as condo development and then developed as such.

The question is why do they want the cost approach? Probably to estimate insurance costs, which is not the purpose of the cost approach.

 

[George Hatch]

There are cost references for multi-family structures.

You're not in California but your state assessor authority might still publish their own cost tables for residential costs.

In my state, the Calif Board of Equalization publishes a cost reference which they update annually. There are instructions for using it so it isn't an EASY button app and you do need to consider a couple elements their costs don't cover. But you can compare the costs for a multi-family to an SFR of similar quality, size, shape and see what that difference is, and perhaps import that difference as an adjustment factor for your SFR costs in the reference you're using.

California BOE publication 531

AH 531, Residential Building Costs - Board of Equalization

boe.ca.gov

 

[cdanj]

don't cover. But you can compare the costs for a multi-family to an SFR of similar quality, size, shape and see what that difference is, and perhaps import that difference as an adjustment factor for your SFR costs in the reference you're using.

Dwelling costs has an option for multifamily dwellings. Am I correct in my approach to divide the total dwelling cost of the multifamily by the units?

 

[George Hatch]

Class D SFR construction base costs at the D-7 quality @2200sf


For 2-3 unit structures the Class D construction base costs for D7 quality @ 2200sf are a little higher. (more kitchens/baths for the same size structure)

 

[George Hatch]

Dwelling costs has an option for multifamily dwellings. Am I correct in my approach to divide the total dwelling cost of the multifamily by the units?

If it were me I'd just use the higher cost. It's not like the buyers and sellers of these units are using a CA in their decision making anyway. If what the lender is really asking about is insurable value then that shouldn't be reported as a CA to MV to begin with.

If what they really want to know is about insurable value then doing it that way also eliminates the need to analyze for accrued depreciation and land value. Less for the user to screw up in their decision making.

 

[J Grant]

I've been getting these new construction hard money loan appraisals on 2 Family and three family dwelings that are being built with the intention of each unit being sold as conod units and they want cost approach. Also, I've been using dwellingcost.com
A two family side by side in my market is viewed by the public and treated by the owners as 1/2 duplex, gnerally with the owners having a simple agreement and insuance policy.
So, I guess the cost approach would take the entire exterior measurements and halve them.
But a top/bottom three unit building. Would I do the same and just 1/3 them?

IMO, the fact that the developer might want to sell the units as condos in the future is not germane to today cost to build

I would go for total sf and the construction quality ( avg or good ) and factor in the quality of the materials - S tile roof or comp tile roof, etc., and then add in the cost of additional bathrooms and the additonal kitchens that each unit adds to the total. Sounds like a rough cost estimate is appropriate and a land value would be part of it. A 3000 sf single-family house would have one kitchen and maybe 3 bathrooms - that same 3000 sf as a three-unit would have 3 kitchens and perhaps 6 bathrooms.