HUD 221(d)(4) Replacement & Construction Cost Estimates

Before beginning the HUD multifamily construction loan process, it's important to know how much your project will cost to build (construction cost), and how much it will take to replace (replacement cost). 

Construction Cost Estimates

Direct Construction Costs 

Direct construction costs for a multifamily project can be placed into several groups, including: 

  • Land improvements, including:

    • Unusual land improvements

    • Other land improvements

  • Structure costs, including:

    • Main building

    • Accessory building

    • Garages

  • Builder/contractor fees, including:

    • General requirements

    • Builder's general overhead costs

    • Builder's profit (see BSPRA)

    • Bond premium

    • Other fees

Architectural Fees and Financing Costs 

Non-direct construction expenses include architectural fees for design and supervision, as well as financing costs. Financing costs and carrying charges for a project include: 

  • Taxes

  • Builder's risk insurance

  • FHA mortgage insurance premium (MIP)

  • FHA exam fee

  • Financing fee

  • Legal fee & application fee

  • Permanent placement fee

  • HUD-eligible bond financing fees

  • AMPO (N.P. Only)

  • Title & recording

Legal, Organization, and Audit Fees

Other kinds of expenses in the construction process can consist of legal, organizational, and audit fees. These include: 

Other Related Costs

  • Consultant fee (N.P. only)

  • Contingency reserve (Sec 202 or rehab only)

  • Tenant relocation expenses (rehab only)

  • FF&E (furnitures, fixtures, and equipment)

Replacement Cost Estimate

An estimated replacement cost can be calculated by examining factors including the warranted price of the fully improved land, the as-is property value (for rehabs), and off-site factors (if needed, for rehabs). 


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