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How Much Does it Cost to Build an Apartment Complex?

Amy Gilmore
August 5, 2022

Apartment complexes can be a huge revenue source. So, it makes sense that investors wonder, 'How much does it cost to build an apartment complex?'

The truth is, there is no clear-cut answer to that question. The total investment price depends on the location, floorplans, materials used, number of units, amenities, and other factors.

So, we created an in-depth guide that includes building cost per square ft, unit, property type, and complex size. Keep reading to learn everything you need to know to estimate the price of your complex, finance the project, and make your multifamily property a successful investment.


What Is the Average Cost to Build an Apartment Complex?

The average cost to build an apartment complex depends on numerous factors like land value, number of floors, unit sizes, property type, and more. However, the median size of units built in 2021 was 1,032 sq ft, and only 2,000 out of 12,000 complexes had more than 50 units.

At the national median of $398 per square foot, a 50-unit high-rise will start around $20 million.

Price Factors to Consider When Building an Apartment Complex

You have probably figured out that many factors impact the cost of constructing a multifamily apartment complex. Knowing these factors and how they affect prices can help you better understand why complex construction costs have such a vast range.

Location and Land Costs to Build an Apartment Complex

The location where you plan to build will significantly impact the cost of land for a multifamily complex. For example, an acre of land centrally located in New York City costs around $123 million. The average price per acre of land in Miami, FL, is $4.4 million. In Houston, TX, you can buy an acre of land in the city for between $200,000 and $1.5 million.

So, the building location will have an impact. If you want to build an apartment complex in a major city, you can expect to spend between $150,000 and $123 million for a piece of land big enough for a multistory building with 50 to 100 units.

Permits Needed to Build an Apartment Complex

Permits are an essential factor when you are developing property. The cost to obtain the proper permits can be tens of thousands of dollars, depending on local building regulations. Some cities require developers to pay 'impact' fees, which also adds to the cost of pulling permits.

Additionally, you may need to re-pull permits each time you change your building plans. You will also need to file zoning permits if you plan to subdivide lots or combine lots with multiple locations into a single property.

Affordable Housing vs. Luxury Apartments

Affordable housing units are much less expensive than luxury apartment homes. The average cost to build affordable multifamily dwellings is $164 per square foot, while the average price for high-end housing is $398 per square foot.

Cost of Materials and Labor to Build an Apartment Complex

Material and labor costs differ depending on your region, which is why builder price per square foot costs vary significantly from state to state. The fluctuations in building costs correlate with the availability of materials and workers.

Material and labor prices are at an all-time high. Prices dictated by lumber, steel, concrete, and other industries that supply building materials change frequently.

Furthermore, more people borrow for residential and commercial real estate deals when interest rates are lower. The more developers there work on projects, the fewer materials, and laborers available.

That drives the prices even higher. However, due to inflation, eviction rates are rising. With interest rates on the way back up, fewer developers are borrowing for new projects, so the cost of building supplies will likely decrease in the coming months.

Architecture Fees 

The architecture fees cost between 5 and 20 percent for apartment complexes depending on the complexity of the design, design changes, the frequency you work with the firm, and the overall building costs.

The cost of hiring an architect

Additional Fees

In addition to the building, materials, and land acquisition costs, you must factor in property insurance and legal and accounting fees. These are charges for items that you pay for outside of closing. Other items you should include in your additional fees include decorations, furnishings, gym equipment, and other things you will need to prepare this property for tenants.

Equity and Returns When You Build an Apartment Complex 

If you are using your property portfolio to fund this venture, it is critical that you ensure you are giving up equity for a profitable return. If you are planning a smaller apartment project with fewer units and mortgage rates are higher, it might be challenging to squeeze a profit out of the deal.

Therefore, you would likely want to look for other areas or projects to invest in rather than your positive equity.

Expected Occupancy Rates When You Build an Apartment Complex

Occupancy rates are critical when you are investing in apartments. If you are using a construction loan, you may need to convert to conventional investment financing, and occupancy rates can impact origination fees and loan-related charges.

Currently, top-tier complexes are seeing lower tenant retention and new lease rates. So, you can expect your high-class apartment complex to take longer to reach good occupancy levels, at least for the last quarter of 2022 and the first quarter of 2023.

With longer waits to reach profitable occupancy rates, you may not want to invest in a high or mid-rise at this time.

Apartment Construction Cost per Square Foot

Knowing the cost per square foot for your property development is a huge help when estimating building costs. Unfortunately, like all other building-related expenses, many factors impact per square foot prices.

Construction of Apartment Complex

Construction Cost Per Square Foot - Luxury Complex

Average development costs for luxury units are more than double the price per square foot. The median cost per square foot for high-end properties is $398.

Construction Cost Per Square Foot - Affordable Housing Complex

The average nationwide cost for building an affordable living complex in 2020 was $164 per square foot. However, the current median price per square foot is likely closer to $180 to $200 for budget-conscious communities.

Per Unit Construction Cost

Determining the construction cost per unit is relatively straightforward if you know your area's price per square foot rates. For example, if it is $350 per square foot, you can use the median unit size built in 2021 of 1,032 square feet to calculate the average price for each unit, which would be $360,850.

Then, you can multiply that figure by the number of units you plan to build to get the cost for the entire project. So, for a 20-unit construction, you are looking at $7.2 million.

Apartment Building Cost by Type

The cost of developing a multifamily building goes up with each additional floor. However, you can attribute some of the increased prices of high-rises to top-tier properties that usually feature upgrades, amenities, and larger living spaces.

Cost to Build an Infill Apartment Complex

An infill complex is one built on a previously occupied lot in an urban area. Since these complexes have to fit on a standard or a slightly larger lot, they often provide fewer apartments and just a few stories.

These complexes are typically more affordable, though. The median building cost for infill properties is between $90 and $190 per square foot. So, if you can fit ten 1,000-square-foot units, the high-end development cost is around $2 million.

Infill complexes tend to utilize lower-grade materials. However, these properties are smaller and take less time to build, meaning you can lease the units sooner.

Additionally, infills are in urban areas, with more potential tenants. So, reaching acceptable occupancy levels is not as challenging as it can be with a multi-story property with 50 to 100 units.

Cost of Building a Low-Rise Complex

Low-rises are slightly higher than infills in construction cost at $156 to $250 per square foot. So, a 10-unit low-rise with 1,000 square foot homes will cost between $1.5 million and $2.5 million.

Building Cost for Mid-Rise Apartment Complexes

Construction costs start to climb when you are developing a midrise. The price per square foot is between $190 and $290. So, a 1o-unit mid-rise can cost between $1.9 million and $2.9 million. The higher per square foot considers that mid-rise developers typically use higher-grade materials.


The Cost to Develop a High-Rise

Any building with more than 12 stories is considered a high-rise. The taller the building, the higher the price per square foot, but the median cost ranges from $300 to $550+.

Apartment Development

High-rises contain between 4 and 20 units per floor. So, a 13-story high-rise with four units per floor would include 52 individual apartment homes.

If we use the average rental size of 1,000 square feet, the total cost to build a high-rise would be between $15.6 and $30 million. Additionally, you will likely need the ongoing support of a building engineer and architect. Non-architectural and

Who Do You Hire to Build an Apartment Complex?

As the property developer, you can choose what company to build your rental building. Some commercial builders focus exclusively on multifamily developments.

New innovative companies are also using lower-cost sustainable building methods to construct multifamily properties quicker and for less money.

An Austin, TX company called Juno is completing several apartment projects using their cutting-edge methods, and the founders are hoping to change the multifamily construction industry with their ideas.

Working with a builder that offers unique property development solutions that are less costly could be great for marketing your complex and lead to higher building occupancy initially.

Whether you work with an experienced traditional commercial builder or a new company offering diverse building options, you need to ensure that they have the correct licenses and that the company is bonded and insured.

What Do You Need to Know Before Building an Apartment Complex?

The larger your complex, the harder it is to manage. A building with 100 units takes longer to reach a good tenant occupancy level.

So, whether you are new to real estate investing or just interested in expanding your portfolio with a building that generates rental income from multiple units, you may consider a smaller project to start.

Building costs for low and mid-rise buildings are cheaper per square foot, and they still offer the ability to construct multiple units under the same roof.

It is als

Alternatives to Building an Apartment Complex

Apartment development can have impressive investment returns with favorable timing and other factors. However, large-scale multifamily investing is not for everyone.

Here are a few other investment opportunities that will likely cost less and present significantly less risk.

Buy a Highrise Foreclosure

Even high-rises go into foreclosure from time to time. If you want to invest in a residential high-rise, purchasing and upgrading an existing property is often more economical.

The price per square foot for renovations is between $30 and $60. Plus, you have the option of renovating the units as tenants vacate their units. So, you can keep the property occupied while you do the upgrades.

Furthermore, getting financing for a high-rise with decent occupancy will likely be more manageable because lenders see it as less of a risk. They know the property is already generating income.

You will need to secure a loan or fund the project yourself. However, if you get the property for less than the value, you may already have positive equity you can borrow against to renovate.

You may also qualify for construction or remodel loans using the property as collateral. You can find high-rise properties for

Consider Converting Office Space Into a Luxury High-rise

There are numerous empty commercial office buildings in cities across the country. Some towns are allowing investors to convert these buildings into residential apartment units.

The cost of doing this concept could be significantly less than constructing a new apartment building. However, you will still need extensive assistance from an architect to make this idea work.

Commercial to Residential

In addition to being more cost-effective, conversions are better for the environment. A project like this can raise the value of the neighboring homes and businesses. Sometimes these buildings sit for years before an investor or the city takes action to tear them down or rehab the massive eye sores.

Nevertheless, when investors convert an abandoned building into usable space, local news channels are usually eager to share the development project. The attention you get will help you rent units faster, which is what you need to make a project of this type profitable.

Build Apartments on a Parking Garage

It may seem ridiculous to build on a parking garage, but investors are utilizing rooftops to build more affordable rental properties.

The type and number of units you can construct on the space will depend on the structure and square footage available.

But, this is a viable option for investors willing to think outside the box. Furthermore, some of the construction costs associated with a mid or high-rise are eliminated because you are developing an existing structure.

Renovate an Older Complex

You do not have to build a new building to offer tenants an incredible living experience. Numerous aging low, mid, and high-rise buildings are available to buy for a fraction of the cost of building a new one.

Build a Motel

Motels can generate just as much if not more than long-term lease communities and often cost significantly less to construct.

Invest in Motel

Savvy motel investors even include custom homes on an upper level to offer onsite housing for property managers or owners.

The return on investment for hotels and motels is often higher than it is for residentially leased buildings. For example, if the motel has 20 rooms that rent for $100 per night and the property has around 80 percent occupancy, the annual revenue generated is close to $600,000.

Of course, you have to deduct the cost of ownership. However, you can build a 20-room to a 30-room motel for between $3 million and $5 million. So, receiving a positive income should take a shorter period.

Build a Micro-Unit Complex

Micro-unit buildings are an attractive option for investors who want to try their hand at property development without committing to a more costly investment that carries higher risk. Micro-units are tiny apartments, usually 400 square feet or less.

With rental rates rising, more people are willing to live in tiny houses. You can make these units more marketable by including innovative storage features, built-ins, and large windows or mirrors to make the space feel larger and add natural light.

These units do not have to be one-room or one-bedroom. You can create micro apartments with as many bedrooms as you want. You make the bedroom space smaller and reduce the size of the living room and kitchen.

You can also outfit your two-bedroom dwellings with a shared bathroom between the bedrooms instead of a separate bathroom for each bedroom. That reduces the cost per unit significantly as the cost of building a new bathroom is between $10,000 and $30,000.

Think About Developing a Tiny Home Community

Tiny homes have been popular for some time now, and they are as popular as ever with people budget-conscious consumers. Furthermore, if new home prices continue to rise at alarming rates, more people will be looking for cost-effective ways to reduce their housing expenses.

invest in tiny houses

Tiny homes can range from $10,000 to $60,000 to construct, significantly less than the cost per unit for most multifamily dwellings.

You can fit three or four tiny homes on a standard residential lot, and the rental rate for these houses is around $800 per month, comparable with budget-friendly one-bedroom apartments.

FAQs About the Cost of Building an Apartment Complex

Hopefully, you thoroughly understand the cost factors and pricing for investing in apartment complexes. If you want to learn about what other investors are asking and the answers to their most pressing questions, look over these FAQs.

build apartment complex

How Much Do You Make If You Own an Apartment Complex?

The amount you profit off an apartment building depends on whether you financed it or paid cash, rent prices, maintenance costs, and business overhead. However, you may be able to make $100,000 or more annually depending on how much money you have upfront and your personal and business connections.

How Much Does it Cost to Build a 20-Unit Apartment Complex? 

On average, a 20-unit community will cost between $2 million and $20 million. These buildings are typically mid-rises with between four and ten stories.

The more stories your building has, the more costly it is to construct. However, a 20-unit, 4-story apartment building takes more land to build than a 10-story with the same number of units in most situations.

So, you must factor the cost of acquiring the land into the final price when deciding between a low or mid-rise building.

How Much Does it Cost to Build a 4-Unit Apartment Complex?

The median cost to build a mid-range 4-unit apartment dwelling is between $250,00 and $400,000. These properties do not require extensive work by an architect, reducing the overall cost significantly.

They also require fewer materials, make the construction easier to manage, and take less time to complete. So, a fourplex is a good start if you want to develop multifamily properties.

Is Buying an Apartment Complex a Good Investment?

Buying an apartment complex is a good investment if you get it for the right price and have the knowledge to manage the investment.

Even if it needs extensive repairs, buying an apartment complex is often a better investment than building a new one.

Are You Ready to Build an Apartment Complex?

Building an apartment complex is exciting, and it can change your life in terms of your income potential. However, it also has substantial risks.

So, before you build an apartment building, consider all your options. Numerous properties are sitting vacant that the right investor can turn into a profitable venture.

No matter what property type you choose to build, you should consult with a knowledgeable real estate attorney and tax accountant. Then, you should talk to local realtors to get their opinions on occupancy and rental rates for the property type you want to develop.

Knowing your multifamily complex's market, development costs, and potential downfalls will help you avoid costly mistakes.

If you have done your due diligence and think multifamily property development is correct for you, you know how much it costs to build an apartment complex, and you should be prepared to try it.



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Written By:
Amy Gilmore
Amy has over ten years of experience as a title company branch manager and closing trainer. Her escrow book of business includes national lenders, real estate wholesalers, investors, property developers, and top-selling realtors. Amy is passionate about teaching the benefits of investing in property and mentoring others in the real estate industry.
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