Financing Repairs on Inherited Property

[Mantas Motekaitis]

Hi BiggerPockets community,

My family is inheriting a 6 unit multifamily in Chicago from my great uncle. With his old age he unfortunately failed to keep up with building maintenance and rented the units for $425 a month. There's a large pile of renovations that need to take place (foundation lift, roof repair, windows etc...).

I see it as a great opportunity to restore it to a functioning rental property, especially given that there is no outstanding mortgage. I have local property management lined up to address the tenant problems and help with renovation. 

I'm looking for some advise on how to finance the initial renovation cost. I am considering a HELOC. If I went that route does anyone have recommendation for Chicago HELOC lenders?

[John Warren]

@Mantas Motekaitis this is a fantastic opportunity for you and your family for sure. I think the big question you need to answer here is how much rehab needs to be done, and do you have the right team to turn the building around. Rehabbing these older buildings can be challenging, and its not cheap. I also would caution you and your family to have a discussion about roles and compensation internally. If there are multiple family members involved then it gets very complicated. Multifamily is not actually passive, and someone will need to be engaged in the property even if it is just managing the manager. This can lead to resentment if you don't get ahead of these issues. 

The other thing to consider is that your family is now inheriting the stepped up basis. If you sell and split proceeds then you could each do what you wish. I would ask yourself if this building in the area you would choose if you were starting from scratch?