Looking at my first property. Would like opinions

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Looking at my first property. Would like opinions

Michael D Anthony
Member since 2025 · 1 post · 0 votes

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! 

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G. Brian DavisPro Member
Investor · Hatboro, PA · Member since 2016 · 3k+ posts · 868 votes
8mo

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.

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  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    8mo

    @Michael D Anthony, a few thoughts:

    1. When you underwrite a deal, YOU need to come up with the estimates. 

    Every single deal will come with estimates and rationale that make sense on the surface. You need to challenge each assumption intensely and/or independently come up with your own estimates. In the end YOU are the one on the hook once you get into the deal not the source of this information. So, YOU need to accept responsibility for the underwriting process and not just accept someone else's. 

    2. Do you have experience with a significant rehab? It all sounds good, get a bid, hire a contractor, press go and wait for it to be done. If it was that simple EVERYONE would do it. It isn't anything near to that simple. 

    3. If you don't have experience, you may not be able to get hard money. Many/most want someone who has experience because its a big factor in whether the deal is successful. 

    4. Consider an experienced partner to help you make this happen and to help qualify for the hard money. 

    5. There absolutely could be issues that were overlooked in the initial plan. 

    6. The seller bought this property several years ago. How old are their quotes? If their quotes are 2020, today's prices are significantly higher!

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  • Eric Gerakos
    Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
    8mo

    If the property is in a "Poverty stricken area" then your tenant pool will be poor with high vacancy, maintenance and evictions. Tenant pool and potential appreciation should be your primary concerns. 

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  • G. Brian DavisPro Member
    Investor · Hatboro, PA · Member since 2016 · 3k+ posts · 868 votes
    8mo

    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.

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