Need Advice for 7-room Multi-family

2 Replies

Hello fellow investors! I have an opportunity to, either, wholesale a 7-room, 2-story 'building' or JV with someone renovating it and room-sharing it out. It can also make a great office for a law firm or other business. The problem is, I don't know if there is a market for such a building that needs a ton of work to wholesale, or if the rehab costs are more than the building is worth investing in.

Running comps is almost impossible for this building and in the area it is in, so determining an ARV is very difficult. Wholesale price will be no higher than $210k, but rehab cost estimates are $150k+, which is ALL IN for $360k+. What makes this investment perfect is the location and on-site parking for up to 5-7 vehicles, plus other great reasons. Rent in the area for 1b/1b is $750 to $950, so potential monthly rental income can be between $5,250 to $6,650.

My questions are: Is there a market for something like this in Houston? What is the best way to calculate an ARV for this investment? And, what type of JV agreements might work for this kind of deal? Thanks for your interest!

 congrats on the contract . My thoughts are we below 

1) All in Cost: You need to add financing cost for 12 months period which is roughly 30-36K for the project (~10%) plus closing cost. To 360+ 36K financing + 4K closing = 400K all in for a project that you have 12 months to buy/rehab/rent/exit 

2) Rent comps: 1bed/1bath isnt same as house vs condo vs garage apt vs hotel style house hack. Suggest you take 20-30% off from house vs house hack to test your pro forma . 

3) Rental Market in Houston : COVID certainly slowed down short term rental for obvious reasons, specially inner city . Oil market lay off are happening. On survey properties are selling but underneath as have a slow down . I would be very cautious for that amount of money for 1 project 

4) Disposition: Typically you would just sign a JV agreement ( one pager) to assign the contract . JV agreement and sales contract will go to Title at he same time . Very simple process

Best wishes 

@Shahriar Khan , thanks for the reply. I did forget to factor in the holding costs for the mortgage. Perhaps, under a different time, it might be worth it. I haven't settled with the owner, yet, because I want to be sure there is a buyer. Because of its unique situation and difficulty to estimate costs and ARV, as well as rental income like you mentioned, I thought I would reach out to more experienced investors for feedback.