Looking at my first property. Would like opinions

[Michael D Anthony]

Hello, 

I am looking at a 4 unit property in a poverty stricken area where rental demand is strong. The property is gutted and listed at $250k. The previous owner is in commercial real estate, purchased for $130k several years ago, began rehabbing it and decided to sell it to focus on other projects. They have provided their blueprints and contractor quotes of $160k to get it finished and livable. Estimated timeframe is 6 months of labor. All permits have been approved with the local municipality and only need to be re-pulled to finish the job. The projected ARV is 500-550k. The projected rental income is $6000-$6800 when finished.

My concerns are: 

- Funding the deal. Needs to be hard money loan and these costs could be high. 

- I am a new investor and needing this much work seems daunting. Can I trust the contractor quotes? 

- Refinancing once completed to pull cash back out of the deal - concerned about these costs as well. 

- Could there be hidden permit issues that were overlooked? 

Thanks all! 

[G. Brian Davis]

Hi @Michael D Anthony, to be honest, this isn’t a light first deal. Gutted properties in high-demand but distressed areas can work, but the risk is all in execution. I’d assume the rehab comes in higher and takes longer than quoted, especially if you’re new, and I wouldn’t rely on someone else’s contractor numbers without getting your own bids. Before moving forward, make sure the exit refinance actually works with conservative rents, higher rates, and lender seasoning rules. If the deal only works when everything goes perfectly, it’s probably too much risk for a first project.