Vacant Multiplex Good or Bad?

Question

Hey everyone, I am still very new at this but I have an opportunity to buy a Triplex property. It was owned by my spouse's grandfather. They were living on the main floor, the 2nd level is vacant for a longtime now and their son was living on the 3rd floor rent free.

My question is how will this affect the bank evaluation of the property since they can't rely on previous rent? Will it be harder to get financing since their is no income?

Also is this good for me to rehab and refinance?

What are your guys thoughts? Anything in particular I should look out for?

Thanks everyone,

Alex

Stephanie P. · Answer

Hey Alex

There are a couple of ways to do this depending on how it's structured.

Instead of buying the property, you could be put on title with a warranty deed.  Then you could refinance the property and take cash out after 6 months of ownership and the people who put you on title could come off at close.  Because you were in title and it's seasoned, there's no transfer tax.

If you're going to buy it and live in it, you could do a 203k or HomeStyle Renovation loan to bring the property up to standards prior to renting the other units out.  It's a good way to use cheap, long term money to your advantage.  With the cost of lumber and most other things that have to do with construction, using cheap money is a great hedge.

To answer your question, you won't get credit for the rental income because there are no leases in place and no rental income on your 1040's.  You could go with a no income verification loan if you're not going to live in the property and they'll use a comparable rental analysis for DSCR (debt service coverage ratio).

You can use a combination of these suggestions above depending on your cash situation, how it gets titled and most importantly occupancy.

All the best

Stephanie