So. I'm currently under agreement on an off market 5 unit. This is my second "going to close" deal.
I've made offers on several properties and have been looking down all avenues for a deal. I finally found one. I walked the property after meeting the seller and was excited to see 3 turnkey, very nice units and 2 that needed work. 1 just needs to be rezoned and the other needs to be rehabbed (this was a 5 but lost its zoning).
We agreed on a good price, especially with the potential of this property. I waved all contingencies besides the mortgage contingency. No earnest money. I did my own home inspection because I have been around building construction most of my life and currently do electrical work.
During due diligence I found that in order to make it a 5 unit again, I'd have to file multiple use variances and install automatic fire suppression ( sprinkler systems). This now becomes a much more costly and time consuming endeavor that likely is not worth the cost or time.
However, it still is profitable and offers a 14% CoC return semi conservatively. AS IS. Still, I do not feel as good about this deal and as we proceed I consider renegotiating or backing out. I'm also afraid that because of this market and the rate of inflation and rise of home prices I will miss this deal and it turned out being better than I thought.
I am under contract to but this within the next few weeks.
Anybody have any advice?
If the property still cash flow since you account for the zoning and sprinkler system, why are you hesitant?
I would say to keep in mind that it’s it a guarantee that the rezoning or variance will be approved. So, do the numbers work as a 4-unit?
@canesha edwards thanks for your input!