24 unit multifamily rehab - Construction loan / materials
I've just recently tied up a 24 unit building. The plan is purchase the property with a construction loan including rehab costs. Rehab 2 units a month and move existing tenants into newly remodeled units, rinse, wash, repeat and stabilize the building in a year and refinance after increasing annualized NOI. - Not having done this before, can you see any issues with this plan?
I've started my due diligence and getting bids from general contractors to rehab units. I'm curious if anyone has purchased materials in bulk at volume discounts for their contractors and stored them on site or at a warehouse until needed? If so, what sort of discount less than retail can be had with a 24 unit? What sort of deals be made with the big box guys?
Rehab Items:
Millwork and Doors
Counters (laminate)
Appliances (dishwasher, range, microwave, and fridge)
Cabinets
Flooring (both vinyl, laminate wood, carpet)
Thank you in advance for your feedback
Most Popular Reply
Fannie's small balance program exists on paper however I don't know anyone that has successfully completed one under 1MM. Plus fees are generally cost prohibitive with such a small loan amount. I think this has been discussed a few times on BP so I would search the archives. I would definitely not count on the program and I'm not sure it will pencil out with the extra costs involved. Also be very careful of who you deal with from a commercial broker standpoint. There are many great companies out there however there are many companies that are not credible and profit from upfront fees. Find a local or regional broker who understands your market (and capital markets). Fannie/Freddie multi-family loans have a lot of guidelines that don't fit into every property type (no matter the loan size).
I actually just read this article yesterday about Freddie expanding their small balance program...however you should note the average loan size is 2MM.
http://nreionline.com/multifamily/freddie-mac-ramp...
I definitely don't want to be discouraging, if you can figure out a way to make the program work at under 1MM I would love to hear your experience.