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

[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 condo units

The above is from the OP post.

Even if a building is made into condo units, the cost to construct as if new still includes cost of the land it sits on - the developer paid for the land, correct? The fact that indiviudal units are made into condos and sell for their own price points is a different issue. It costs the same to build a 3000 sf structure, a 2-unit building on an X-size lot of land, regardless of whether the developer sells the units as condos, rents the units, or sells the units as fee simple.

It costs 300k to acquire a certain site. It costs, for example, 500k to construct an X-size building of Y # units regardless of whether I, as a developer, plan to rent the units, sell them as fee simple, or sell them as condo units.

 

[George Hatch]

The value of a parcel suitable for 2 units is often different than the value of a parcel that's only suitable for one unit.

 

[sputnam]

Per the OP above, the intention is to convcert the units in the future to condos. The land has a value now.

Actually, the land has value in a condo too -at which point it is absorbed into the prices of the units. The cost to build a condo building, with an acquisition cost for the land, would be a different question than the value of individual condo units .

The land for a condo has value... but the owner of a condominium unit owns the space inside the walls... with an undivisable interest in the total land. That land can't be marketed separately, so there is no separate market value

 

[J Grant]

The land for a condo has value... but the owner of a condominium unit owns the space inside the walls... with an undivisable interest in the total land. That land can't be marketed separately, so there is no separate market value

That is correct, however, the assignment the OP referred to was not to value a condo unit.
It was a cost approach for a building where the developer later wants to sell off the units as condos.

When a developer builds a building intended for condos, the developer still had to buy the land.
It sounds like the OP is asked to do a cost approach for each unit? However, they go on to say that the appraisals are for hard money construction loans.

If it costs 900k to build a structure, including the acquisition cost of the land, and the builder's goal is to later sell off three condo units, the CA for each unit would be 300k.
Disclose and explain that in a future date, when three units will be sold as condos, the price for each condo unit in the future is unknown at this time

The OP can also add that individual condo prices typically include a % share of the underlying land and amenities - which likely the client already knows- but they can CYA and add it as a comment.

 

[J Grant]

If it costs 900k to build a 3-unit building, including the $ to purchase the lost, it would work out as a simple divison of 300k cost for each unit if that is the assignment.

A year from now, if the builder gets a C of O and sells off three condo units...the future price of each unit can be more or less than the cost to build . The developer might get 500k for each unit and make a profit, or the developer might get 250k for each unit and lose money.

The OP has to be clear about what the purpose of this assignment is.