How Much Money Is Needed to Build an Apartment Complex? Complete 2026 Cost Guide

How Much Money Is Needed to Build an Apartment Complex? Complete 2026 Cost Guide

Understand the true costs of apartment development—from land acquisition through lease-up—and how to finance your project

By Clear House Lending Team | Published February 2, 2026 | 10 min read

Building an apartment complex requires substantial capital, but the exact amount varies dramatically based on project scope, location, and quality level. A modest 20-unit garden-style complex might cost $5 million, while a 200-unit luxury high-rise in an urban core could exceed $75 million.

Understanding these cost variables is essential for realistic project planning and securing appropriate financing. This comprehensive guide breaks down every cost component of apartment development, from land acquisition through construction completion, helping you build an accurate budget for your specific project.

At Clear House Lending, we've financed over $2 billion in multifamily construction projects across the country. This guide draws on that experience to help you understand what your apartment complex will really cost and how to fund it.

Apartment Complex Cost Overview

Understanding Total Development Costs

Apartment development costs extend far beyond construction expenses. To accurately budget your project, you need to account for every cost category from initial land acquisition through lease-up and stabilization.

The Full Cost Picture

Total development cost encompasses everything required to deliver a completed, operating apartment community. This includes:

• Land acquisition: Purchase price, closing costs, carrying costs during development
• Pre-development costs: Due diligence, entitlement, design
• Hard costs: Actual construction of buildings and site improvements
• Soft costs: Professional fees, permits, financing costs, insurance
• Contingency: Buffer for unforeseen costs and changes
• Reserves: Interest reserves, operating reserves, lease-up capital

The per-unit cost for apartment construction in 2026 typically ranges from $150,000 for basic garden-style apartments in secondary markets to $400,000 or more for luxury high-rise units in major metropolitan areas. These figures represent total development cost, not just construction hard costs.

Why Costs Vary So Dramatically

Several factors create the wide cost range in apartment development:

Location: Land costs in urban cores can be 5-10x suburban land prices. Labor costs also vary significantly by market—construction labor in San Francisco costs 40-60% more than in Dallas or Atlanta.

Building Type: Wood-frame construction (limited to 4-5 stories over podium) costs significantly less than steel or concrete structures required for taller buildings. Each additional story above 5 floors adds structural and code requirements that increase per-unit costs.

Unit Mix and Size: Larger units cost more to build but often have lower per-square-foot costs. Studios and one-bedrooms maximize unit count but require the same kitchens and bathrooms as larger units.

Finish Level: Class A luxury finishes (granite counters, stainless appliances, hardwood floors) can add $15,000-$30,000 per unit compared to Class B finishes.

Amenities: Pools, fitness centers, clubhouses, roof decks, and other amenities add $5,000-$20,000 per unit depending on scope and quality.

Detailed Cost Breakdown by Category

Let's examine each cost category in detail so you can build an accurate budget for your specific project.

Construction Cost Breakdown by Category

Land Acquisition Costs (10-20% of Total)

Land typically represents 10-20% of total development cost, though this percentage varies dramatically by location. In land-constrained urban markets, land can represent 25-30% of total costs.

What's Included in Land Costs

Purchase Price: The baseline land cost. Expect to pay $20-$50 per buildable square foot in suburban markets, $75-$200+ in urban cores, and $200-$500+ in prime urban locations.

Closing Costs: Title insurance, transfer taxes, survey, and legal fees typically add 1-3% to land cost.

Due Diligence: Environmental assessments (Phase I and potentially Phase II), geotechnical reports, surveys, and feasibility studies cost $25,000-$75,000 depending on site complexity.

Entitlement Costs: Zoning applications, variance requests, community meetings, and related legal/consultant fees can range from $50,000 for straightforward approvals to $500,000+ for complex entitlements.

Carrying Costs: Interest on land acquisition financing, property taxes, and insurance during the pre-development and construction period.

Land Cost Examples by Market

To illustrate the dramatic variation in land costs:

• Secondary Suburban Market: A 5-acre site supporting 150 units might cost $1.5M ($10,000 per unit)
• Primary Suburban Market: The same site could cost $4.5M ($30,000 per unit)
• Urban Infill: A 1-acre site supporting 150 units in a mid-rise might cost $7.5M ($50,000 per unit)
• Prime Urban: The same urban density in a top market could command $15M+ ($100,000+ per unit)

Site Work and Infrastructure (8-12% of Total)

Site work costs depend heavily on existing conditions, required parking, and local requirements.

Site Work Components

Grading and Earthwork: Clearing, grading, and site preparation typically cost $5,000-$15,000 per unit. Challenging topography, rock, or soil conditions can double these costs.

Utilities: Extending water, sewer, electric, gas, and telecom services to the site. Costs range from $8,000-$20,000 per unit depending on distance to connections and required infrastructure upgrades.

Parking: Surface parking costs $3,000-$5,000 per space. Structured parking costs $25,000-$45,000 per space. Underground parking can exceed $60,000 per space. A 150-unit project with 1.5 spaces per unit (225 spaces) could pay anywhere from $700,000 for surface lots to $13.5M for underground parking.

Landscaping: Basic landscaping runs $3,000-$5,000 per unit. Enhanced landscaping with mature trees, water features, and hardscape amenities can exceed $10,000 per unit.

Stormwater Management: Retention ponds, underground detention, and stormwater infrastructure typically cost $3,000-$8,000 per unit depending on local requirements and site conditions.

Hard Construction Costs (50-60% of Total)

Hard costs represent the actual construction of buildings—the largest single cost category in any apartment development.

Cost Comparison by Building Type

Hard Cost Components

Foundation and Structure: 15-25% of hard costs. Wood-frame construction costs $15-$25 per square foot for structure. Steel and concrete structures cost $35-$60 per square foot.

Building Envelope: 10-15% of hard costs. Includes exterior walls, windows, roofing, and waterproofing. Quality materials and energy efficiency requirements impact costs significantly.

Mechanical Systems: 15-20% of hard costs. HVAC, plumbing, electrical, and fire protection systems. Individual unit HVAC systems (PTACs, split systems) cost less than central systems but have higher operating costs.

Interior Finishes: 20-30% of hard costs. Flooring, cabinetry, countertops, fixtures, appliances, and paint. This category offers the most flexibility for value engineering or upgrading.

Common Areas: 10-15% of hard costs. Lobbies, corridors, amenity spaces, and building systems serving common areas.

Construction Cost Factors

Several factors significantly impact hard construction costs:

Labor Market Conditions: Tight labor markets can add 10-20% to construction costs. Union vs. non-union labor creates significant cost differences in some markets.

Material Costs: Lumber, steel, concrete, and other materials fluctuate with market conditions. 2021-2023 saw unprecedented material cost increases that have partially moderated but remain elevated.

Building Codes: Energy codes, accessibility requirements, and local amendments vary by jurisdiction. California's Title 24 energy requirements add $5,000-$15,000 per unit compared to less stringent jurisdictions.

Project Timing: Starting construction in spring allows completion before winter weather delays. Winter starts in cold climates can add 5-10% for weather protection and reduced productivity.

For vertical construction projects, structural system selection significantly impacts both cost and timeline. Work with your architect and structural engineer to optimize the building system for your specific project.

Soft Costs (15-20% of Total)

Soft costs encompass everything that isn't physical construction—professional services, permits, financing, and project management.

Soft Cost Components

Architecture and Engineering: 3-5% of hard costs. Includes architectural design, structural engineering, MEP engineering, civil engineering, and landscape architecture. Complex projects with multiple building types or challenging sites cost more.

Permits and Fees: Impact fees, building permits, utility connection fees, and other government charges vary dramatically by jurisdiction—from $5,000 per unit in fee-friendly markets to $50,000+ per unit in high-fee jurisdictions like California.

Financing Costs: Loan origination fees (1-2%), interest reserves, and closing costs for construction financing. For a $20M construction loan at 9% interest over 18 months, interest carry alone exceeds $2M.

Legal and Accounting: Entity formation, loan documentation, contract review, and accounting services typically cost $50,000-$150,000 for a mid-size project.

Insurance: Builder's risk insurance, general liability, and other project insurance typically costs 0.5-1.0% of hard costs.

Marketing and Lease-Up: Pre-leasing marketing, model units, leasing office, and initial lease-up expenses run $1,000-$3,000 per unit.

Developer Fee: If you're syndicating equity or using structured financing, developer fees of 3-5% of total costs are typical.

Contingency and Reserves (10-15% of Total)

Experienced developers know that construction projects rarely come in exactly on budget. Adequate contingency and reserves protect your project from derailment.

Contingency Reserve

Include 10-15% contingency on hard costs to cover:

• Design changes: Unforeseen conditions, owner-requested changes, code interpretation issues
• Material cost escalation: Price increases during construction
• Weather delays: Extended timeline increasing carrying costs
• Subcontractor issues: Contractor failures, quality problems, schedule delays

Lenders typically require 10% contingency at minimum. Experienced developers often budget 15% for complex projects.

Interest Reserves

Construction loans require interest payments during construction, but the project generates no income. Interest reserves fund these payments. Calculate interest reserve as: (Loan Amount) x (Interest Rate) x (Construction Period / 2) x 1.25 for safety margin.

For a $20M loan at 9% interest over 18 months: $20M x 9% x 0.75 x 1.25 = $1.69M interest reserve needed.

Operating Reserves

Lenders also require reserves for initial operations before stabilization:

• Lease-up reserves: Cover operating expenses and debt service during lease-up (typically 6-12 months of expenses)
• Working capital: Fund initial operations, tenant improvements, and concessions

Development Budget Planning Process

Step 1: Market Feasibility Analysis Research rental rates, vacancy rates, and absorption to determine achievable rents and project viability

Step 2: Land Acquisition Evaluation Assess site costs including purchase price, due diligence, closing costs, and entitlement expenses

Step 3: Design and Scope Definition Work with architect to optimize unit mix, amenities, and building efficiency for target market

Step 4: Hard Cost Estimation Obtain contractor bids for construction, site work, and specialty systems

Step 5: Soft Cost Budgeting Calculate permits, fees, professional services, financing costs, and pre-opening expenses

Step 6: Contingency and Reserves Add 10-15% contingency plus interest reserves and operating capital

Financing Your Apartment Development

Understanding costs is only half the equation—you also need to know how to fund them. Apartment construction typically requires a combination of equity and debt financing.

Typical Capital Stack

Equity (20-30% of total costs): Your own capital plus any investors. Equity bears the most risk but captures the upside. For a $25M project, expect to contribute $5-7.5M in equity.

Senior Debt (70-80% of total costs): Construction loans from banks, credit unions, or private lenders. Interest rates currently range from 7.5-10.5% for apartment construction loans.

Mezzanine/Preferred Equity (Optional): Additional leverage between senior debt and common equity, typically at 10-15% cost of capital.

Construction Loan Requirements

Lenders evaluate apartment construction loans based on:

Loan-to-Cost (LTC): Most lenders offer 70-80% LTC, meaning you need 20-30% equity. Experienced developers with strong projects may access 85% LTC.

Loan-to-Value (LTV): Based on appraised value upon completion. Typical maximum is 75% LTV.

Debt Service Coverage Ratio (DSCR): Projected stabilized NOI divided by debt service. Minimum 1.20-1.30x required.

Borrower Qualifications: Credit score (680+ minimum, 720+ preferred), liquidity reserves (6-12 months debt service), net worth (typically equal to loan amount), and development experience.

Use our commercial mortgage calculator to model different financing scenarios for your project.

Financing Options for Apartment Construction

Clear House Lending offers multiple financing solutions for multifamily development:

Traditional Construction Loans: 12-24 month terms, interest-only during construction, converts to permanent financing or requires refinance upon completion.

Construction-to-Permanent Loans: Single-close loan that converts from construction to permanent financing upon stabilization. Eliminates refinancing risk and reduces closing costs.

SBA 504 Loans: For owner-occupied mixed-use projects, SBA 504 offers as little as 10% down payment with favorable terms.

Bridge-to-Construction: Interim financing to acquire land and complete pre-development while construction financing is arranged.

Key Cost Factors That Impact Your Budget

Location is the biggest variable - urban cores cost 2-3x suburban sites. Building height matters significantly: wood-frame construction (up to 5 stories with podium) costs 30-40% less than steel/concrete high-rises. Unit size affects per-unit costs - studios and 1-bedrooms cost less per unit but more per square foot. Amenity packages (pool, fitness center, clubhouse) typically add $8,000-$15,000 per unit. Always include 10-15% contingency - construction cost overruns are common.

Sample Project Budgets

To bring these concepts together, here are sample budgets for three different apartment development scenarios:

Scenario 1: 60-Unit Garden-Style Suburban

• Land (3 acres): $1,200,000
• Site Work: $900,000
• Hard Costs ($165K/unit): $9,900,000
• Soft Costs: $1,800,000
• Contingency (12%): $1,200,000
• Reserves: $600,000
• Total Development Cost: $15,600,000 ($260,000 per unit)

Scenario 2: 120-Unit Mid-Rise Urban Infill

• Land (1.5 acres): $4,500,000
• Site Work: $2,400,000
• Hard Costs ($230K/unit): $27,600,000
• Soft Costs: $5,500,000
• Contingency (12%): $3,300,000
• Reserves: $1,500,000
• Total Development Cost: $44,800,000 ($373,000 per unit)

Scenario 3: 200-Unit High-Rise Luxury

• Land (0.75 acres): $12,000,000
• Site Work (including structured parking): $8,000,000
• Hard Costs ($320K/unit): $64,000,000
• Soft Costs: $12,000,000
• Contingency (12%): $7,700,000
• Reserves: $3,000,000
• Total Development Cost: $106,700,000 ($533,500 per unit)

Common Budgeting Mistakes to Avoid

After financing hundreds of apartment developments, we've seen recurring mistakes that derail projects:

Underestimating Soft Costs

First-time developers often budget 10% for soft costs when 15-20% is more realistic. Don't forget financing costs, permit fees, and the time value of money during extended approval processes.

Inadequate Contingency

Construction cost overruns average 5-10% even for well-planned projects. Weather delays, material price increases, and unforeseen conditions happen. Budget 10-15% contingency—it's not pessimism, it's prudent planning.

Ignoring Carrying Costs

Money has a time cost. Every month of delay adds interest expense, property taxes, and insurance costs. A $25M project with an 8% construction loan costs over $165,000 per month in interest alone.

Underestimating Lease-Up Timeline

New apartments don't fill overnight. Budget for 8-12 months of lease-up with concessions and below-market occupancy. Your proforma should show realistic absorption, not immediate stabilization.

Comparing Apples to Oranges

"Per-unit cost" means different things to different people. Some quotes are hard costs only; others include all development costs. Always clarify what's included when comparing costs or using industry benchmarks.

Partner with Clear House Lending for Apartment Construction Financing

Building an apartment complex requires significant capital and the right financing partner. Clear House Lending specializes in multifamily construction financing, offering competitive rates and flexible structures for projects of all sizes.

Why Developers Choose Clear House Lending

Multifamily Expertise: Unlike general commercial lenders, we focus on apartment and multifamily financing. We understand development budgets, construction timelines, and lease-up challenges.

Competitive Terms: We offer construction loans with up to 80-85% LTC for qualified borrowers, competitive interest rates, and flexible draw schedules that match your construction timeline.

Efficient Process: Our streamlined underwriting process gets you from application to closing in 60-75 days for well-prepared applications.

Hands-On Support: From initial consultation through construction completion, our team provides dedicated support to help your project succeed.

Get Started Today

Ready to move forward with your apartment development? Here's how to begin:

1. Schedule a consultation: Contact our multifamily lending team to discuss your project and receive preliminary feedback on financing options

2. Submit preliminary information: Project summary, site details, and preliminary budget for initial review

3. Receive a term sheet: Qualified projects receive preliminary terms within 7-10 business days

4. Begin formal underwriting: Submit complete documentation and application package

5. Close your loan: We target 60-75 day closes for well-prepared applications

Don't let uncertainty about costs delay your apartment development. Contact Clear House Lending to discuss your project with an experienced multifamily construction lender, or apply for construction financing today.

With accurate budgeting, adequate capitalization, and the right financing partner, you can successfully develop an apartment complex that generates strong returns for years to come.

Tags: apartment construction costs, multifamily development budget, apartment building financing, construction cost breakdown

Category: Construction Lending Guides

Last Updated: February 2, 2026