The demand for apartment buildings across South Africa has been on the increase as more households opt to live in apartments for various reasons. This has attracted more investors to invest in multifamily structures that promise higher cash flow than single-family rentals. One major factor that an investor must consider before moving to multifamily commercial real estate is the cost of building or buying. So how much does it cost to build an apartment complex in South Africa? Keep reading to find out!
South Africa is among the top countries in Africa where more entrepreneurs are investing their cash in commercial real estate. In November 2021, the Department of Statistics released the value of building plans approved and completed in larger municipalities across South Africa between January and November 2021.
A total of almost R54 million worth of private sector building plans, including residentials, additions and alterations, and non-residentials, had been completed. Flats and townhouses were valued at an estimated R12 million.
How much does it cost to build an apartment complex?
Many factors are taken into consideration if you choose to construct a multifamily rental property from the ground up. One of the major factors is the cost which is spread across various elements. The needed cost to build apartment complexes is calculated per square foot and does not include contractor and architect fees, land purchase, and finishing costs.
The structure type, size, shape, and province you intend to construct will affect how much you spend per square metre. A single apartment can have several stories high with a number of units per floor.
According to sources, the construction cost per square foot for multifamily apartments in South Africa is as follows:
- VAT RDP housing: between R1,300 and R1,500
- Low-cost housing (with basic materials): Between R2,100 and R3,400
- Simple low-rise apartment block (5-storey with about 50 units): Between R5,000 and R7,000
- Prestige apartment block (with about 100 units): Between R9,500 and R14,800
Remember that these are simply estimates and the actual figures vary depending on multiple factors such as location, material types, construction style, size, and the number of units. The cost to build a 20-unit apartment building varies significantly from the amount needed for a 100-unit high-rise apartment building. Other elements such as swimming pools, social areas, gyms, and parking garages drive the cost of construction high.
Apartment building cost calculator
How much does it cost to build apartments? The total cost of constructing apartment complexes varies with each project. To have a general estimate of how much you will need, here is a breakdown of various costs as a percentage of the entire project. The figures are sourced from Fixr.
- Architect fees: 8.9% to 10%
- Contractor or builder cost: 25%
- Foundation: 9%
- Floor structure: 12%
- Walls and exterior finish: 6% to 10%
- Roof and cover: 10%
- Windows and doors: 5%
- Interior finish: 6% to 10%
- Floor finish: 3% to 5%
- Interior features: 3% to 5%
- Bath detail: 4%
- Kitchen: 8%
- Electrical: 10%
- Plumbing: 12%
- Mason walls: 9% to 12%
How much does it cost to buy an apartment complex?
The price of apartment complexes is valued according to the income it produces or could potentially earn. The age of the building and the type of property also affects the structure’s market value. In addition to the structure value, there are transfer taxes, legal and conveyance fees, valuation fees, and transfer fees incurred.
Apartment complex financing
It is generally easier to obtain financing to buy or build complex apartments than single-family rentals. However, traditional lenders will assess several factors such as your personal wealth, credit score, and investing profile, as well as asset performance and potential before extending credit. Most lenders will also need a large down payment of about 20% and generally have higher interest rates.
Loans for financing apartment complex costs are short-term and have to be repaid from between 5 to 20 years. If you fail to repay within the terms agreed, the lender may sell the property or choose to refinance.
How to build an apartment complex
Constructing multifamily structures is extensive, expensive, and complex. After having a rough estimate of the building cost, here are other things to consider;
- Research the area: Location determines land cost, which accounts for between 10% and 20% of the total project cost
- Know the types of tenants you want to attract
- Understand the laws and regulations: The legal process can be handled by a professional attorney.
- Equity and returns: Assess your equity and study the rental market to determine if your expenses are justified and will lead to profit
- Get a reliable general contractor, architect, engineer, and other professionals that will make the process proceed smoothly.
After getting a rough estimate of how much it costs to build an apartment complex in South Africa, it is good to do your research before investing. Multifamily structures make good investments due to multiple cashflows, which leads to a higher return on investment. However, you need to assess the pros and cons of investing in an apartment complex and having single-family rentals spread across various regions.
Briefly.co.za published real estate courses one can study in South African institutions. The course is marketable since real estate development is on the rise in municipalities across South Africa. The need for property managers is therefore high.
The courses are offered at different levels, including undergraduate, master's, doctorate, diploma, and certificate. Real estate studies are taught at various top South African institutions such as the University of Pretoria, UNISA, UCT, and Wits University. Read more about real estate courses here!
Source: Briefly News