Hello,
I purchased a vacant old nursing home that is in a low income area of the Dallas / Fort Worth area. The place has 30+ Rooms and is over 15,000 square feet. I was going to convert this 1950's building to an assisted living facility, but it looks like it will cost too much without any guarantee that the operation will be successful. I'm now looking into alternative uses for the building.
I was wondering if anyone had any ideas. Keep in mind it looks just like a little hospital / old nursing home. Big doors, big hallways. Other things i have considered are developmentally disabled housing (don't know anything about), veteran housing (know very little), homeless children, special needs (don't know much)... I have the building, now i need to perhaps figure out a good business plan for one of the above or perhaps find someone who knows how to write government grants.... The area is low income and i'm sure there are programs.
Anyone have any ideas?
Since you have a building and no idea what to do with it, perhaps you should partner with someone who has a plan but can't afford a building. Try to find the jelly to your peanut butter.
Depending on the area you may be able to qualify for grants to update the facility. Especially if you are planning on using it for a not for profit purpose. May I suggest you contact the Veterans Administration and ask about their housing program for disabled and elderly homeless veterans.
DFW is a very large area, so a little bit more details would be helpful, in order to point you in the right direction.
I know of two deals troubled youth and state was using corp property and couldn't renew lease the state needed a place they willing to do all updates but want long term
Sounds like the cart is ahead of the horse here. Shouldn't that have been planned before buying it?
One word of caution - I am going to assume that you never had an asbestos survey done. If you don't know what to look for, have a contractor come in and look it over to identify potential "hot" materials. I would not recommend doing an actual survey or testing though because if it tests hot, you have to disclose it. If you don't have actual testing done, then you can simply say that you haven't had anything tested.
If it looks like there is a lot, you may want to look hard at how much you are willing to commit to this project. My guess, based on the type and era of the building is that it is loaded with asbestos material. It is a great building material...that kills people and costs a ton to get rid of.
It kills me when people here talk about assisted living. I know people who do it. It is a very complex, highly regulated business. The real estate is the least of it.
Assisted living is not a real estate investment.
Since you have a building and no idea what to do with it, perhaps you should partner with someone who has a plan but can't afford a building. Try to find the jelly to your peanut butter.
Since you have a building and no idea what to do with it, perhaps you should partner with someone who has a plan but can't afford a building. Try to find the jelly to your peanut butter.
I think this is great advice. In addition to a plan, it would be great to find someone who is local to the area.
We met in Cleveland. My first thought would be subsidized housing for Section 8. There are loans and grants and tax credits available to refit a building and provide housing. You're probably looking at a total refit including all mechanicals, separating heat and electric, new windows, and maybe a new roof. It would be much like building a whole new building. But cities are often receptive to a upgrade like this as the alternative of an empty building decaying away.
Best wishes
I would suggest get a broker involved in that area to assist you with commerical lease or list as business opportunity. The other ideas mention about converting it to Section 8 or local housing authority are also good ideas, I'm sure there is grant money available on something like this. Post some pictures of the inside/outside, you should get more feedback.
Yes, should have had a plan before you bought it.....LOL
Well, don't think there is money from HUD for new "owned housing" as a PHA, doubt that will fly at all. A PHA may lease a property but they won't have funds for an existing property purchase. Section 8 isn't "owned properties" of a PHA.
Most likely, without a huge rehab, you'd have an SRO, single room occupancy as studios. Not many have Sec 8 vouchers that are single, the elderly and disabled can but not as to a family, so that's very limited. The PHA can tell you what the demand would be for SROs.
I'd contact non-profits that serve elderly, disabled and homeless clients, lease to them not to their clients.
You may find a group of doctors to turn the place into an out patient medical facility as well.
Another use is to lease to a parent non-profit that in turn sub-lets to other non profits, you'll find that many organizations work together and for a client to qualify for benefits and services, there is an application process. That application process often relies on clearing through other agencies for services or to ensure that other services are not being duplicated. A church organization may have a food bank, so will the Salvation Army, so may another organization, these organizations may or may not partner to provide food and serve clients on an application, qualification basis, ensuring people are not being over served (and abusing the entire system). Most organizations will provide a service that is not duplicated, if the senior center isn't providing a walker, the XYZ disabled and-or blind may.
So, it is very handy for various non-profits servicing a community to be housed under one roof. Govt offices can be leased there as well, Medicare In-Take applicants, PHA housing applications, social security may have an office there, County Health Dept. as all of these organizations and government offices must coordinate community activities.
A good lead tenant that may organize that system might be the United Way as they are usually the lead funding agency for grants and fund raising in a community. Some small non-profits serving a niche may obtain free or subsidized rents from a United Way.
If you want a nursing home or such, find an existing provider and lease to them as trying to get into that business is haunted with stiff competition, regulatory oversight and it is very political as it is based on community needs.
Look to professional publications for advertising, hospital administrators, nursing homes, medical journals, non-profit organizations, churches and government like NAHRO and your economic development office. The market will set the demand for the highest and best use. Good luck :)
While this property doesn't sound as homey as places I've toured, another idea is a recovery house for drug users. You may want to talk to your local drug abuse resources to see if there is any need/desire. Or abuse shelter, if it can be made private and secure; our local shelter just moved to a larger building. Both of these programs have a lot of on-site counseling and strict rules about staying in the program, so could be a good fit. Both alternatives would likely take some time for them to scrape up the money/grants to customize the property and move, so you may be looking at an extended vacancy.
I've seen these facilities sell for very cheap. Assisted living operators don't want them because they are functionally obsolete. If they do the full retrofit, the cost is often higher than the purchase price. Operators are building new.
The design of the older facilities are unique so as to be a challenge to repurpose. Homeless shelter? What part of DFW is it in?
One word of caution - I am going to assume that you never had an asbestos survey done. If you don't know what to look for, have a contractor come in and look it over to identify potential "hot" materials. I would not recommend doing an actual survey or testing though because if it tests hot, you have to disclose it. If you don't have actual testing done, then you can simply say that you haven't had anything tested.
If it looks like there is a lot, you may want to look hard at how much you are willing to commit to this project. My guess, based on the type and era of the building is that it is loaded with asbestos material. It is a great building material...that kills people and costs a ton to get rid of.
Wow, this may just qualify as the most unethical post/advice I have ever had the displeasure of reading. Note to self, never do business with Mr. Johnson.
"A word of caution" you got that right. This way of doing business is exactly what gives us developers a bad name.
I will not dignify @Jay H. 's comments with a direct response. I will, however, do a better job explaining my post for the benefit of others that may read it.
First of all, in commercial real estate such as the property described in the original post, it is NOT uncommon for a property owner to officially "not want to know". I am currently working on buying a piece of industrial real estate that allows me to perform a Phase I Environmental Study, which, to those that don't know, is essentially researching archives and paperwork to help to determine if there MIGHT be a former use of the property that COULD have caused reason for concern of the potential contamination. The consultant looks for records of underground storage tanks, underground vehicle lifts, former foundry operations, for railroad operations, etc. etc. that help to determine the POSSIBILITY that there is some sort of contamination. If that possibility exists, then I, as the buyer, have to decide if I want to perform a Phase II, which involves testing and/or excavation. Note that depending on the type of property and/or structure, testing could also include the structure itself. In my current deal, the seller can, at their option, pull the plug on the deal if the Phase I reveals the POSSIBILITY of contamination or concern. The reason they have negotiated that into the deal is that if they allow me, as the buyer, to continue forward into a Phase II, and I (or my hired consultants) find something, then either the seller OR the consultant doing the study HAS to, by law, report certain findings. If we find something on the Phase II, then I have the option to back out of the sale contract. HOWEVER, since the contamination may be reported, the seller now has to do something about it, irregardless.
The reason for the above explanation is to offer a better description of the risks involved in commercial real estate and, to an extent, residential real estate as well. The intent behind my post is to give the OP honest and frank information about what he may be faced with after choosing what to do with his property. I personally know of a number of investors and developers that have been caught with their pants down because they NEVER looked at the possibility of there being asbestos containing material (ACM) in their structure. They simply rush forward to buy the property without investigating or doing proper due diligence, rush to find a tenant/use, rush to get floor plans drawn up, sign contracts with contractors, then get "the call" on day 1 of the project saying "Houston, we have a problem". Some of those developers are now bankrupt.
Any ETHICAL contractor and/or developer will need to know this information before any ACM is disturbed to protect the health and welfare of both workers working on the project, people that are exposed to the project, and ultimately the general public when they start using the project.
To continue, all of the steps required AHEAD of developing this project represent a significant capital investment along with extended time on market. This type of property will not be occupied in a month or so, it will take a lot of time and a lot of money to get it to that point. Marketing is not free. Design studies and planning, are not free. Extended holding costs, are not free.
Now that I have taken the long way around, let me further explain my post. I suspect, by the lack of planning ahead of time as to what to do with the property, that the OP did not due enough due diligence on the subject property prior to buying it. My assumption is that he saw a lot of square footage at a low price, and jumped in. That was the first mistake, in my opinion. To help him avoid another huge mistake, I recommended that he try to get a "feel" for whether there may or may not be ACM in the building. Based on MY experience, knowing the age and use of the structure, there is an above average chance that significant ACM exists. If that proves to be true, the abatement bill could be in the 5 or 6 figures, certainly a significant project cost that could later prove to be a surprise/deal breaker. If he jumps right at doing testing now that he has already messed up and bought the property, then he may have to act on test results. He doesn't have to act on "maybe". Essentially, he is dipping his toe in the water without actually jumping in.
By recommending that he try to get an idea what he had now, versus actually getting material tested, was in order to benefit the OP so that he could better determine ALL costs involved in redevelopment. If his contractors say to him that there is a good chance that ACM exists, then he can determine his next move NOW, before spending time on marketing/designing/etc. Basically, he becomes better informed.
If it is found to contain ACM and the rough estimates for abatement are project prohibitive, then the OP can make an informed decision as to what to do next.
Personally, I sympathize with what I suspect happened to the OP. I looked at his location as well as the property location before I originally responded. I also considered all of the other facts that were given. I may have been short in my first post, but my intent was never unethical. I have nothing to gain nor lose in this deal. I also have nothing to gain nor lose by taking the time typing out either of my responses. I offered an experienced point of view on a very expensive factor that so far, nobody has even touched on. I realize the OP was more about who to put in the building. My approach offered more of a how to make it happen point of view, or even how much to make it happen. As a developer/investor, the how much is FAR more important than who.
Jay, next time ask questions before pointing fingers. No worries on doing business together.
To anybody else reading my comments, feel free to ask questions if I haven't been clear enough explaining my recommendations.
Rants and politics aside, I have a friend who is a longtime investor in the Palm Springs and surrounding areas on CA desert communities.
He purchased a similar property and had similar challenges. His solution was to rent to the very group that have the greatest difficulty finding access to housing: registered sex offenders.
Ok. I know people have really strong negative feelings and i am not here making any attempt to change or influence your opinion about the people. People on the list typically have to stay away from schools, parks and playgrounds and I presume other restrictions. All which lead to either remote neighborhoods or institutional-type housing arrangements.
Putting prejudices aside (they are not a protected class of citizens), if they pay their bills and have the money, this might be a profitable approach. The local community activists might even support the idea.
What I'm offering is a creative solution to a real estate problem. If you already own a building and have a limited budget to repurpose it and generate cash flow (as opposed to gutting it as a shell or demolishing it as bulldozer bait).
Anyone have any great names for this new apartment building of one room units?
@Adam Johnson, great explanation of the processes associated with potential environmental issues And the mitigation of responsibility, but that doesn't clarify your alluding to the act of not disclosing "hot" spots.
I am in the exact situation at this very moment. I purchased a gas station property to repurpose. This property had a clean tank/no further action report from the state. And I opted to still get a phase 2 Which was clean. Well, during site work we discovered a "hot" spot (I love the phrase) by way of an unidentified pipe. Some people suggested, as you alluded to that I not get it tested or explored further because it's deeper than our final subgrade. Even though we all knew what was probably there. Guess what I said? The same thing I said in my original reply above.
At that point it's yours to deal with properly. Which I did to the tune of 12,000.00.
If everyone did the right thing life would be much more enjoyable.
My "HOT SPOT "
My grand mother was a wise woman, she always said that, if you got into the conversation without an answer to the problem, you are part of the Problem. She also said,, to never argue with a fool because some one will pass by and not know the difference. The following is some advice approved by Grand Mom.
1st, the government just don't give Grants to people for the asking. Tax Exempt 501 ( C) 3 Organizations would give anything to partner with Ray, in the development of some kind of special needs housing with government Grant Funds. I know I would. Ray can't get the Grant direct. The money for these programs go to local Governments who re-grants to local non profits. It is best to start a collaborative effort with an organization who has been successful in getting the funding for the purpose you seek.
All the suggestions to Ray are good and may work with the right money behind the idea plus, may upgrade the low income community where the project is located. However, by understanding the benefit of donating the property to charity, and walking away, would be my suggestion.
There are so many charitable planning techniques that, will allow Ray to receive income from his purchase of real estate while generating tax benefits, I can't discuss them all here on BP. One I like is the Charitable Trust, which pays the donor income for life or the life of a beneficiary. If you don't want the life income, set a specific term. When you make the transfer to the I.R.S. designated 501( C) 3 organization you also get a Tax break based on the fair market value of the property plus, the monthly Check from the Charity
Now how is that, for managing the property and the problem because, the non profit can get a Grant, not an individual.
There was a property near here that had been a business location for many years. The original owner passed away and the heirs were selling the prop. They told all potential buyers that there were no USTs (Underground storage Tanks). A suave experienced buyer got the property under contract with a contingency that the seller would be responsible for all UST and cleanup if needed. since they said there were no USTs they signed the contract. 9 USTs were buried on the property and were removed as well as soil all paid for by the seller!
Please review both of my previous posts. At no point did I advise to simply "sweep it under the rug". Please take a minute to ponder what I suspect the OP has done to himself. We still haven't heard back from @Rav Ram , so all we can do is speculate. My assumption is that the property was purchased with very little, if any, due diligence. As a result, Rav may be in a very bad situation with exposure to cleanup and abatement that could end up being a 6-figure expense. Again, we don't know any details, so we are all speculating.
My responses gave him an approach that allows him to know "unofficially" what problems he may be facing in order to make an informed decision what to do next...or to ask for help in how to get out of a bad situation with the knowledge that reasonable advisers will need to give an informed opinion.
Your situation is slightly different. You had a clean Phase II. However, you disturbed the pipe that was previously unknown to even exist. Using your experience as well as the fact that the former property use was a gas station, a reasonable person could and SHOULD assume that it contained petroleum and/or possibly could have been a potential hot spot. It is my understanding that because you actually disturbed it, you were minimally required by ethics to handle it properly, and may have also been required to do so by law (I don't know the law part but understand the rest). I will also point out that you purchased the property likely with a good idea what you were going to do with it BEFORE you actually closed on the deal and it sounds like you were also experienced enough to due your proper due diligence ahead of the purchase, due to mentioning the Phase I and II.
The OP's situation sounds to me like lack of experience. I can't even imagine why else anybody would purchase a property such as the one mentioned and not have any idea what to do with it. As soon as I read that part of the OP, I had alarm bells sounding all over. That is why I offered a possible pitfall that he may never have even considered. Had the timing of the post been BEFORE he actually closed on the property, my response would have been much different and I would have advised to get testing done before closing. Because it is too late for that now, I offered a way to test the water he is already swimming in.
I think sharing examples may also help others understand this situation better. We have each shared examples and I have another one to share.
I was purchasing a property formerly used as an auto dealership. We knew of that use, as well as the fact that there used to be underground lifts in the shop area. They had been removed several years prior and had a clean bill of health. We wrote in to our purchase contract that we could do a Phase I anyway, just in case. The Phase I exposed that long ago the property had been used as a metal foundry (early 1900's) as well as records of underground fuel tanks, which the seller either didn't know about or decided not to tell us about. Either way, there were no records of the tanks being removed, which indicates one of two things happened. One, they were still there or two, they "disappeared" one night when nobody was looking. Either way, as the buyer, we needed to know, so we revised our offer to include doing a Phase II, since our original contract included allowing us only to do a Phase I and "receiving satisfactory results". The seller refused the change to the contract, we received our earnest money back and we were out the cost of the Phase I. However, we saved a potentially HUGE cleanup bill because if we chose to still close the deal, we were on the chain of title and could have had to carry the cost of a cleanup if the Phase II determined a spill.
For my example, looking at it from the seller's side, he was very wise to refuse us the opportunity to do a Phase II. The reason I say this is exactly why I said what I said about the asbestos earlier. Yes, in essence it is burying your head in the sand, but this is how the world of commercial real estate works. It is also good reason not to jump into commercial real estate until you understand it. I respected the seller's choice, even though I lost money on the cost of my Phase I, because the law requires that if, at any point, it is determined that a reportable quantity had been spilled, the consultant doing the Phase II HAS to report it to DEC, regardless of who has hired the consultant. Once it is reported, action must be taken. In my example, the seller was well-advised that by refusing to allow us to do a Phase II, he was also, in essence, refusing to "know" if a spill had ever occurred or "know" of the existence of any underground tanks. Since, as a result of our Phase I, all anybody could do was speculate, no action was required.
To compare my example with the OP, I advised to have a contractor (not a testing agent) that could reasonably point out POTENTIAL asbestos material, take a look. Again, this is based on my assumption that the OP lacked commercial experience. By having somebody give him feedback that has better experience than the OP, the OP can make a more informed decision as to what to do next. On the flip side, the OP could choose to have a full survey done, which is going to cost far more than having an experienced contractor look at it. There is also the possibility that if the survey finds HOT areas, further action may be required. I should also add that having an actual survey done changes the game considerably because the OP would be required to disclose the presence of ACM because having a survey changes the knowledge from "could" contain to "does" contain. My advice allows him to test the water before jumping in blind face first.
We have gone way off topic from the OP. However, I think it is important to chronicle it all for future readers since we have now opened this up. What I have said is not unethical, but does include a fair amount of background knowledge in commercial real estate as well as contract law (but I am not a lawyer and not giving legal advice).
Key points in this situation:
In my head, I have already made an educated guess on how this might play out, which is why I made my first response and continue to respond. This property could be, and may already be, a nightmare if it was never tested before the purchase and it is later found to have ACM or any other contaminant. What I suspect happened is that the OP bought what he thought was a "steal" from a seller. If the seller never had testing done prior to the sale, then it is not required to disclose any "maybe's", so therefore isn't unethical. Maybe the seller had somebody walk through and advise them to dump the property cheap before opening up Pandora's box.
Given only what I have had to guess from the OP, my advice would be to test the water by having a knowledgeable contractor give informed advice, then decide what to do next BEFORE spending another dime on marketing the property or designing any re-purpose. A huge and very important step (probably several important steps from what I've seen) appear to have been skipped before this property was purchased. It would be a shame to see the OP take a bath or go bankrupt as a result of somebody like me not speaking up. I have had the good fortune of having strong/experienced mentors save me from making this type of mistake. Had it not been for those mentors, I could easily be in the OP's shoes. I am simply passing along advice I have received.
My guess is that this property is going to turn into a monster and I am trying to help the OP keep from getting bit by it. As stated in my first response, I strongly feel that the cart is before the horse on this one. Nothing else can happen until that is fixed. He needs to know ALL potential challenges before spending another dime on this property.
I would also seek the advice of an attorney that can better advise on what is and is not required to be disclosed. @Jay H. I am informed on the laws of disclosure in NY. I am offended by having my ethics questioned. However, I also realize that this type of forum makes it difficult, at best, to determine how somebody does business. It boils down to how many words they decide to type and how those words end up interpreted on the other end. I will say that in your example, you did what was ethical and legally required where I do business. Every situation has a different set of circumstances, all of which must be considered. I have done my best to do so here.
I apologize for hi-jacking the original post and turning it into a debate over due diligence and disclosure, but I think that the information is relevant and beneficial to the OP. Best of luck to all.
What about a storage unit or even artist studio? I also like the idea of offering it as one bedroom places to an audience that would have trouble renting in other locations.
Don't forget if you do medical you have to look into Oshpod rules!
All the suggestions to Ray are good and may work with the right money behind the idea plus, may upgrade the low income community where the project is located. However, by understanding the benefit of donating the property to charity, and walking away, would be my suggestion.
There are so many charitable planning techniques that, will allow Ray to receive income from his purchase of real estate while generating tax benefits, I can't discuss them all here on BP. One I like is the Charitable Trust, which pays the donor income for life or the life of a beneficiary. If you don't want the life income, set a specific term. When you make the transfer to the I.R.S. designated 501( C) 3 organization you also get a Tax break based on the fair market value of the property plus, the monthly Check from the Charity
Now how is that, for managing the property and the problem because, the non profit can get a Grant, not an individual.
This is interesting to me. I am still stuck on the idea that the original poster may be trapped in a bad spot with this property. This is a potential avenue for a win-win exit strategy, should that be true and he finds himself in need of an "escape" route out of the property. With all of the proper disclosures of course. I like your out of the box input, if I could give 2 votes, I would.
I like both your ideas. Artist space is typically leased at low rents, you know starving artists etc.
There was a Coke Bottling plant nearby that they converted to mini-storage, they basically build a whole new inside, sort of a building within a building. It was a lot of work, but looks good.
There may be USTs, there probably is asbestos, and if built before 1978 probably has lead based paint, and throw in mold if vacant for a long time. There are lots of considerations for a building of this type.
Demo could be expensive and you'd still have to deal with UST, asbestos, & lead