Historic 3 decker in Worcester MA

4 Replies

Hi there,

My mother currently owns a historic 3 decker in Worcester MA. She's owned this property for 25 years or so and is finally ready to move on from it and plans to sell it in the next year or so.

This was my family home growing up, so there is an emotional attachment, but I also see an opportunity.

The house was built in the late 1800's and has nice hardwood floors, 10ft ceilings, and a lot of original craft work. Each apartment is in reasonably good shape, besides some cosmetics (paint jobs, refinish the floors, etc). It has 3 bedrooms, large kitchens, large dining rooms and living areas, as well as a walk in pantry on each floor.  

Unfortunately, it has an old slate roof that needs to be redone (I know that can get expensive!), an external paint job, and the front porch and back deck need some love (good structurally, just needs a paintjob and a few new stairs).

My whole life we have lived on the first floor with random tenants on the two floors above us. After my father passed away, my mother decided she didn't want to put the effort into being a serious landlord any more and rented the floors to my oldest sisters for cheap.

Well the time is nearing and my mother plans to hold onto the house for another year, two maybe. She suggested I buy it from her, renovate what needs to be renovated and rent out the apartments for $900-$1100 each floor.

She plans to sell the house for around 170k.

I see a lot of opportunity but I also see $$$. I am 22 years old and new to all of this. I have very little money to put down (none realistically), and my credit needs some work, but I do have a year or so to save and fix my credit.

Any advice? Any idea how I can get this done the cheapest way possible?

This will be my first property ever, let alone my first rental property.

Help!

Hi Robert,

I'm new to BP but thought I'd give you my take on your situation. You have a few options:

1. live in one unit and you'd only need $8,500 (5% of $170K) as a down payment- can you save that in a year? The other 2 units would bring in $1800-$2200 a month which should be sufficient to cover your mortgage/expenses.

2. Have your mom to finance the sale (if she doesn't need the cash right away) and let the tenants pay down your principal for a few years, at which point your credit score would've improved, savings will have increased, and you could refinance the house paying your mom off in the process. 

3. You could also just work out a deal with your mom where she gives you 80% of the house and she keeps 20% of cash flows, straight equity, or even an interest payment. You go to the bank looking for a $136K loan so no need to come up with any cash. In return you take care of the house. maybe you buy back the 20% from your mom later, maybe you don't.

3. Get a friend/investor from BP community to partner with you.

There are probably more ways to do this but i think this covers the most obvious ones. First post done!

Thanks,

Josh

First ,  if your sisters still renting the other floors for cheap sort out what will happen there.   I have lived through something similar and trust me you want everything spelled out in writing once you make the verbal agreement.  Discuss and agree on whether they will stay and what rate the rent is or would be after remodel. Check market rates, you probably have lots of comps because there are a lot of triple deckers in Worcester. Also decide on the agreement for terms of sale.   Do some talking, make sure your numbers work and I can't stress enough to put it in writing (leases and sales contract). 

Whether you can finance could be tricky without much credit history but you received a few good suggestions above.

Originally posted by @Josh Gagnon :

Hi Robert,

I'm new to BP but thought I'd give you my take on your situation. You have a few options:

1. live in one unit and you'd only need $8,500 (5% of $170K) as a down payment- can you save that in a year? The other 2 units would bring in $1800-$2200 a month which should be sufficient to cover your mortgage/expenses.

2. Have your mom to finance the sale (if she doesn't need the cash right away) and let the tenants pay down your principal for a few years, at which point your credit score would've improved, savings will have increased, and you could refinance the house paying your mom off in the process. 

3. You could also just work out a deal with your mom where she gives you 80% of the house and she keeps 20% of cash flows, straight equity, or even an interest payment. You go to the bank looking for a $136K loan so no need to come up with any cash. In return you take care of the house. maybe you buy back the 20% from your mom later, maybe you don't.

3. Get a friend/investor from BP community to partner with you.

There are probably more ways to do this but i think this covers the most obvious ones. First post done!

Thanks,

Josh

Josh, 

I thought I had responded when you originally wrote on my forum post but apparently not!

I appreciate all of the information and options you have shown me but I was wondering if you could possibly elaborate a bit more on option 3, where my mother gives me 80% of the house and she keeps 20.

 My financial situation has taken a small turn and my original plan of financing the house in full as well as the renovations with a 203k loan may not be an option anymore. 

I am curious as to how I can go about using that option?

A little more about the situation. 

My mother still has about 70k left to pay on the house (home equity loan) and as i mentioned before she wants to let it go for around 150k-170k. 

If I were to go to a bank looking to finance 80% of the sale price, my mother could essentially pay off her home equity loan and still have some left over and she would own 20% of the property? How would I be able to put nothing down? 

Just a little fuzzy on how the details of how this deal would work.

I appreciate your help and I apologize for taking 3 months to respond!

Thank you!