Converting 12 two bedrooms into 4 bedroom layouts and delivering three weeks before move-in

$14k a unit for one bath is high, and that's a fair number to push on from the construction side too. Was the stack being moved, or the slab cored? Because putting the second bath back to back with the first and giving up a closet instead would often cut that line roughly in half.

It helps to run the numbers on a case like this against the version of it that almost happened. If a renovation permit takes twelve weeks instead of nine on a project like this, delivery slips from an August 1 target to mid-September. Students are typically already housed by then, so a six week permit delay becomes a full year of delay in effective terms. Forty five beds at a market rent of roughly 690 is over 370,000 of annual gross not collected, while debt service and taxes on the full purchase and renovation cost keep accruing. That is well over 100,000 of carry with nothing coming in, plus any giveback written into early leases, plus residents who signed and had to find something else and will not sign again. The combined swing can rival the entire renovation budget. So the lesson in a project like this is the same shape as the risk. The entire downside is concentrated in one delivery date, and hitting it is what makes the numbers work. Before backing someone else's version of this, it is worth knowing whether they have built in a full year of carry, and whether the deal survives delivering a year later than planned. If it does, a slow permit queue is an annoyance. If it does not, one clerk's timeline stands between the sponsor and the equity.

@chriswalton8 that's the post worth rereading. It's easy to get stuck in analysis on a much smaller conversion and never once model the version where the leasing season gets missed entirely. Modeling three months of extra vacancy is the wrong unit to be planning around.

Starting from nothing here, so a basic one. Why does 45 beds at $690 beat 12 units at $1,150 by that much? Is the per-bed rent just higher because you're renting a room instead of an apartment?

@bmoreno23 yes. Four people paying $690 for a room in a shared apartment is $2,760 for a unit that rented for $1,150 as a whole. Students pay per room because they're comparing to a dorm, and their parents are guaranteeing it. That spread is the entire reason the sector exists, and it's also why every operator in a college town has already thought of this, so the ones left to buy are usually the ones with a physical reason you can't convert.

@gregpowell66 the three units you couldn't get to four beds are the interesting part to me. Did you price the exterior window work and reject it, or was it a code problem you couldn't buy your way out of?

What happens to a building like this in eight years. Everything on the demographic side says the number of 18 year olds starts dropping. A flagship with growing enrollment sounds like the right side of that trend, but adding 21 beds of supply to a submarket also invites everyone else who noticed the same spread to do the same thing.

Nine of twelve units to plan and three that didn't, discovered at plan review. That's the scope creep story every time. On my last one I found out at framing that the second floor bedrooms needed a bigger header than drawn, and the $6k fix cost $19k because the crew was already past it.

@gregpowell66 how much contingency did you carry against the $498k, and what did you actually use it on?

Coming from the trades, the thing I'd flag for anyone copying this is that a June Saturday framing crew in a college town costs what it costs. @gregpowell66 you paid a premium and delivered. Somebody with a thinner budget pays the same premium and runs out of money in week three with the walls open.

The written giveback in the April leases is the detail worth generalizing. It converts a schedule risk into a priced number instead of a fight. How did you set the amount, and did the leases spell out what happened if delivery slipped by more than a couple of weeks rather than a few days?