I have a 5800sq ft, 4 unit apartment building in New Brunswick, Canada that I bought a couple of years ago. The building is quite old and has lots of old/dated wiring that has made it un-rentable until it is rewired.
With all my quotes... I'm looking at about $90k to $100k to renovate the building. There is mortgage of around $60k that I assumed as part of the deal on the building. Upon completion it should have a sale value of $300k and upwards of $400k if we make it a 6 unit building.
I don't have enough equity in my other building to cover my costs and I've been spreading the word whenever I can to let people know that I'm open to ideas. I really need to get this place fixed and/or out of my hair.
What would you do? Does anyone on here have any advice that would be related to my situation in Canada?
If you don't have the money to fix it up, can't get the money from other means, and it can't be rented out as is, I see only one good solution. Sell it. If it is really worth $300k after repairs, you should be able to find an investor who would be willing to buy it as-is for $100k-$110. That puts $40k-$50k in your pocket for your next investment. It's time to move on to another project.
If it were real nice, whats the top end value? Is 90k hiring out the rehab? Wire isnt a big deal, not that expensive THOUGH more because its old construction.
Do as much as u can yourself. get the wiring done, it may not need to be torn ut just disconnected and new wire added. The rest, RIG IT and sell. If you need ANY shortcuts on fixing or makinganything presentable, dont hesitate I guarantee I have a solution!
If it were real nice, whats the top end value? Is 90k hiring out the rehab? Wire isnt a big deal, not that expensive THOUGH more because its old construction.
Do as much as u can yourself. get the wiring done, it may not need to be torn ut just disconnected and new wire added. The rest, RIG IT and sell. If you need ANY shortcuts on fixing or makinganything presentable, dont hesitate I guarantee I have a solution!
And REALLY shop the electricians, they vary a LOTTTT. Dont use a phone book, get the guys at home depot you seebuying electrical equipment wearing shirts of companies you dont know. Some of the guys there even are licensed. One offered to wire my new houses when I was gonna build for 2000 including fixtures (cheap ones). Maybe a credit card just to get it up to speed. 4 units is nothing. No transformers,nothing. Just 4 breaker boxes! Hell, I would be doing it myself hehe but I am a HUGE risktaker with code enforcement. If I wasnt so sneaky, Id be their number 1 most wanted!
That might be the worst advice I have ever heard. I would never hire the cheapest electrician I could find. My mechanical contractors are the one area I never cut costs. You try hiring the cheapest mechanicals and you will pay for it big time down the road. I found my current electrician 5 years ago by a recommendation and I have never looked back. I know he is not the cheapest but he does better work and is faster than any electrician I have ever met so he is the only one I allow to bid my work. I have only 3 plumbing and 3 HVAC contractors that I allow to bid my work. My point is to find good mechanical contractors and stick with them. I have never found a good contractor in a Home Depot in my life. I'm not saying they might not shop there but if they are shopping there they are just picking up a few missing things and running back to the job. More than likely a mechanical contractor with a full cart in a Home Depot means that they are behind on their payments to their supply house so they are now cut off and are now shopping at Home Depot trying to get a couple of jobs completed so they can get caught up on their payments.
Always use contractors that come from recommendations you can trust. That applies to all contractors and not just mechanical contractors.
I love the way you think... but I sometimes feel like I'm on another planet!
Its actually listed for $80,000 right now and no offers yet. Its absolutely amazing how no one sees the potential (I've often wondered if I'm the crazy one and these people are seeing something that I can't see). Every single one of the buyer agents have to come to me to get the keys. After every showing its the same thing.... " its a big job" . I've come to the conclusion that the majority of people in this area are looking for that easy flip... get in... put some lipstick on the pig and get out! The fact that the power is disconnected to the building is a huge part of the " its a big job" . If the power was still on to the building I have no doubt that someone would have snapped it up right away. I also have no doubt that it will sell eventually. The location is good and the apartments are easy to rent in my other building, next door.
Another common thing that I keep hearing is that any of the serious buyers are tied up in other projects and I'm mostly getting the first time flippers looking to catch the wave of a good market.
I'm having a hard time finding hard money lenders in Canada that would do the kind of loan that I need. I found one that looked promising, but their starting loan was $1M.
What's your definition of " real nice" ? If I had been able to get it done I was going to have a 2008 interior in a 1900 frame. I have a friend who sells granite counter tops and imports kitchen cabinets. I was getting a deal on those things which would add a nice value to the building.
That's another problem... I'm disabled and wouldn't be able to do much myself. My role from the time of purchase has pretty much the deal finder and people manager. The wiring is mostly old knob and tube and the city has already disconnected the power to the building prior to me purchasing it. It'll need to be a licensed electrician that will need to get a permit and the city will be inspecting I've been told.
I called all the ones in the yellow pages and a bunch that I had been given as references from friends and family. Most of the ones from the yellow pages never returned my call or showed up. I finally got an answer from one electrician that the reason that happened is that there was so much work going on locally that they can pick and choose their jobs.
I ended up with about 4 quotes and there was a huge range of pricing.
If an electrician can pass 4 yrs apprenticeship and the licensure exam, he has a competency level to wire any residential home blindfolded. Big commercial stuff and transformers,vtotally different. But I am saying get it rentable again and dump it, do it CHEAP. if it passes code, so what why pay more to sell it if it will pass anyways?
My brothers a foreman, so I been around it my whole life. I have wired a house. VERY little can go wrong RELATIVELY speaking. Circuit overload, stuff like that yea, but HAVING done it MANY times, I can say that any moron can quickly figure it out if they have someone to ask. A licensed guy I dont care HOW cheap he is, NO WAY does not know how to wire a house.
People that never have learned any of this stuff criticize people who do, which isn't exactly fair either.Other than human error in the connections, what really can happen so different if the amperages are followed correctly and code is also enforced???
Yeah, dont wire it yourself, unless you learn somehow or have help from a pro, but dont think for a sec u need an expensive electrician to run wiring to your outlets from a breaker!
One of my former tenants is on the way to becoming a licensed electrician. He said he was capable of running all the wires, but to find an licensed electrician to sign off on it was going to be difficult and you'd still need that licensed guy to pull the permit.
Anyhow... the electrical is the least of my concerns. I just need to find the money to hire the people to get the work done.
I don't want to hijack this thread here so this is my last post on this subject but it is obvious to me you are not a licensed contractor as you have said as much in other posts. It's also been said by you that you have learned everything you know about construction from the DIY orange book from Home Depot. Then in another post you talk about construction classes you have taken. Hitching your wagon to your electrician brother does not mean you know the first thing about construction. I'm smelling a fly by night contractor who when he gets in over his head takes the money and runs and that pisses a legit contractor off.
You said " Hell, I would be doing it myself hehe but I am a HUGE risktaker with code enforcement. If I wasnt so sneaky, Id be their number 1 most wanted!" . A good contractor builds above code and does not look for ways to avoid them. Now you are suggesting he hires a licensed electrician. Which one is it? If being an electrician is so easy why does an electrician need to be an apprentice at all. He should just be able to study your DIY book and take the test right? If it is so easy why is it that 15% of residential fires are caused by faulty wiring.
Sorry but I just don't believe anything you say and I think you are giving poor contracting advice. I'm not here to start fights but I think you think of yourself as a jack of all trades but it is clear to me you are a master of none.
Based on the market rents right now... for the $900/month/each for the 2 upper units (1600+ sq ft) and about $750/month for each of the 2 lower units (about 900+ sq ft). Tenants would pay their own heat and lights.
I'm also thinking that if I create some of street parking I could probably get a little extra per month from the tenants.
I should add that obviously that's based on 4 units... if I go with the plan to change it to a 6 unit I would have four 1-bedrooms at $550 and two 3-bedroom units at $750.
The monthly income on the 4 unit is about $3300 and around $3700/month for the 6 unit. I believe I can keep my costs low by keeping it a 4 unit. The cost to add 2 more units by reconfiguring the current 4 units is going to be costly for a small $400 a month increase in rents.
I also think that the large size of these apartments is a real draw for people and its what makes them so easy to rent. In this area of the city its common to find small apartments with tiny rooms.
I don't invest in rental properties so I can just speak from what I have learned from other investors here on Bigger Pockets.
For the basis of this conversation I am just going to talk about this property as if it were to remain a 4 unit building. I think your valuation of $300k might be too steep from an investors perspective. Most investors here talk about the 2% rule which is where they expect to get a rent equivalent to 2% of the cost of the building. So a savy Bigger Pockets investor would evaluate this property by multiplying the $3300 rent by 50 and come up with a maximum property value of $165,000. As you can see that is slightly different than the $300k we initially discussed. Now subtract out the costs of renovations needed and you could expect it to fetch $65k-$75. That is if you have estimated the repair costs correctly. So looking at it this way your current $80k asking price isn't that far off. Makes me wonder - How confident are you in those repair costs? It shouldn't cost you anything to get a contractor or two in there to give you an estimate.
Now here's a long shot -
I know you don't want to hire them to do the work but maybe after you see their numbers you might find something to work with. Let's say you find a contractor that is willing to do the work for $50k. For the sake of conversation lets say he has a 20% OHP on this number. He may be willing to do the work and pay for his out of pocket expenses for a 50% stake in the building with the understanding that you will imediately be selling this building. Now all these repairs cost you nothing out of pocket and his investment out of pocket is roughly $40k. Now that it is all fixed up you may be able to sell it quickly for $165k (maybe more if it's not a savy BP investor). After selling expenses you should have roughly $155k to split. You end up getting nearly your entire current asking price and contractor gets a 90% ROI. Now I don't know how the capital gains taxes would effect either party but as I contractor I would be excited enough about this possibility to explore it further. I've never done anything like this before I was just taking a shot at trying to figure out how to make it work.
I defer to other experts around here to see if my numbers make any sense and of course I know a big part of this is can the repairs be done for $40k-$50k. Then again finding a contractor to work with you on terms like that might be even harder than finding a buyer the way it stands. Too bad you aren't around Chicago I'd be willing to look at something like that if you were in the right area.
Another question would be how long has it been on the market. I think I heard a stat the other day that if you haven't received an offer after the first 10 showings then you are probably asking too much for it. Not sure that number would apply to a place needing a lot of repairs but atleast it's a starting point. I would think if a place were in real bad shape that number may increase to 20 showings. So approx. how many showings have you had on the place.
You did hijack it. But for some reason think I claimed to be a GC??? Never! some GC's are the dumbest people I met. SUBS know their portions better and are the experts. GC's know how to coordinate them, to check code, and thats quite general. After many jobs through the years, including roofing even, you seem to think I cannot do a roof because I did not take an exam even though I did it for a JOB? I also worked construction 4 years, and did register for the state GC exam and qualified, but dont have a desire to chase around subs. or tolerate people building homes through me,so did not take it.
As for homedepot, never touched the book. I only reference local code books if unfamiliar with something. But, even that means I cant know anything I guess. Hell,I have built a house license free legally because it was to be MINE to live in,and I probably did 60% myself except the framing, basic service, trusses, slab, hvac, and exterior. The ARCHITECT is the brains, not the GC. HE determines if the house falls over or not. The GC just follows HIS plans.
Lastly, I will NEVER do anything to others property that is a HUGE undertaking or liability requiring licensure. Tile, carpentry, drywall, yea I dont care I will do it unlicensed. Would I wire your house? No! MAYBE a new light, NOT the whole house or even replace the circuit box. Not big liabilties otherwise, and I know and have done them, then I will do them under the table. A code officer does not know if I am inside a house installing cabinets, tile, nothing. SOME people like to save the cash and hassel, the end result is the same, as is the quality. Experience.
You said " Hell, I would be doing it myself hehe but I am a HUGE risktaker with code enforcement. If I wasnt so sneaky, Id be their number 1 most wanted!" . A good contractor builds above code and does not look for ways to avoid them. Now you are suggesting he hires a licensed electrician. Which one is it? If being an electrician is so easy why does an electrician need to be an apprentice at all. He should just be able to study your DIY book and take the test right? If it is so easy why is it that 15% of residential fires are caused by faulty wiring.
Well, a good investor also looks for maximizing profit, and since I never was a GC nor wanted a trade license, I tended to AVOID paying people to do what I USED to get paid for in many cases through my college jobs. I never was a contractor til last year, in a different field; Paintinglicense and REFACING license. So, it never mattered if I was a good contractor or not, just that I had damn good skills for many trades AND experience in many work related over the years, that my work came out NICE and I tended to OVER fasten, strengthen, support, what I could.
NOT until I invested did I EVER care about code either. It was then that things were done right, and EVERY gc or sub I ever was around NEVER followed code to a tee, or were even there half the time, if the end result was unmeasurable, undetectable, or unseen, which a TON isnt, they just cared that what was visible at inspection points was up to code.
When I DID pull permits,I always passed inspection. No DIY book tells you a 3/8 slope per ft on a drainpipe, etc etc. because CODE IS DIFFERENT COUNTY TO COUNTY, STATE TO STATE! And, is readily available for all trades at your courthouse or online. Its updated yearly here.
Electric comment:
Its VERY easy. IF you have done it. Again, no diy exists. Faulty wiring? Well, potentially manufacturer defects, staples or drywall screws penetrating a wire, or even someone as I said before,who doesnt have ANY experience not accommodating a load properly. Many ways. But other than not doing due diligence and with zero knowledge powering something improperly, it tends to appear mostly ways in which human error is not so much the issue as is faults within the materials.
Sorry but I just don't believe anything you say and I think you are giving poor contracting advice. I'm not here to start fights but I think you think of yourself as a jack of all trades but it is clear to me you are a master of none.
You are entitled to that. I respect that. But also, a few posts dont convey hardly enough to test my knowledge. I am NOT the most law abiding citizen. Yes, perfectionist, but my rule is, if I can save a buck, and have the same exact end result, and the only risk is fines, and I can validate as such from my past experience, I will risk it. 20 homes later, 1 ground up, 5 jobs since I was 16 in labor, Im confident enough to go with what I have gone with the past 17 years.
I'm going to have to look into that more and ask around. I'm going based on what I've been told by 3 or 4 realtors realtors and area comps. As for how confident I am in my costs... pretty confident. If anything I've often thought maybe I had it too padded and as a result too inflated. I've had the last 2 years thinking and talking about it. I've also had a couple of people who I would consider to know more about this then I do tell me " its a $80k to $100k job" . I wasn't going with a contractor for the job... instead I had all my trades people picked and my brother was going to over see (and do some of the work that he can do) the rehab.
Sorry... I forgot to answer this part of your reply.
Its been listed since late December. I've had under 10 showings. I don't remember exactly how many have been here but I've probably had an average of 1 a week.
There is no doubt that I'm a little high on the price at 80k, but since there is a mortgage on the property I wanted to be able to have some wiggle room to work out a deal without losing money.
I am not sure about the numbers. Sticking to the high level version...
Based on the future value have you considered construction financing from the bank? They would pay off the 1st and then fund the work.
If you are offering the place for $80K and expect the repairs to be about the same a new buyer would be in for $160+. If the place is really worth $300K to $400K that sounds OK. Not sure that the rents line up. I also can not tell what repairs are optional given the idea that you might be expanding to 6 units.
Something is off if no one is interested in buying.
Consider selling a partial stake or doing a joint venture with a contractor. Creative and open to problems if you use the wrong structure. Think out of the box or just drop the price to clear the asset off your books.
Like I said in a earlier post... those values are coming from real estate agents and area comps. The rents are based on what I know I can get in the area based on my other building.
I think he was refering to the same thing I spoke about. Looking at the rents it's value should be around $165k but you are saying comps are in the $300k thus the two aren't lining up. It's possible that comps are selling for that $300k but that doesn't make those comps a good investment either. It happens here in the Chicago market all the time. I don't see how some of these landlords make any money but some markets just get overpriced like that. Maybe your market is that way too, I don't know.
