Updated over 5 years ago on . Most recent reply
Some suggestions on my next step
Hey BP! Hope everyone's staying safe while crushing it out there!
Just a question for you pros out there.
Long story short, I purchased a 4,000 sq foot building in cash. Same owner for 45+ years and seller basically used about 25% of the building to live in the last couple of decades. Once acquired, I had the property re-zoned for a 5 unit multifamily. I hired an architect to draw up the plans, and they were approved by the city (after many long months). As I purchased this property in cash, I own it free and clear but the conversion rehab is going to cost roughly double my purchase price. I believe I got a great deal on this building as it's in a prime rental location with the majority of the residents in the area being renters. Speaking with a number of lenders, they are reluctant to fund the deal as it's going to be a major project. It's not so much the dollar amount that bothers them but the ratio of purchase to rehab cost that they are not too fond of. I know when this construction is completed the cash flow from these units are going to be solid. My exit strategy being a refinance and hiring a PM company to take over the day to day. Any thoughts on how I can get this funded or what your next steps might be? I feel like I'm being "punished" for negotiating this deal down to such a great price with the seller because now it seems like the rehab is exorbitantly higher than the purchase and turning lenders away (even one's I've worked with before on smaller projects).
Quick numbers (rounded) so everyone can get a better idea.
Purchase: 116,000
Rehab: 200,000 - 225,000 (basically a full gut / no extensions or additions)
5 Units: One 1B/Ba (rent 850) , Four 2B/1Ba (rent 1100)
Adding Coin Laundry, Storage Units
ARV : 460,000 (conservatively based on income as it's a 5 unit)
Any thoughts? Thanks in advance!