Investor · Reading, PA · Member since 2014 · 167 posts · 49 votes
There is an abandoned 5 unit property that needs a complete gut and renovation. It is about 2500 sq feet. How much do you think something like that would cost, and more importantly, where could I find financing to renovate? It is a great opportunity because it is in a fantastic location. Just not sure how I would pay for the renovation.
@Jennifer Fernéz what's your plans after rehabbing it? Do you want to flip it or keep it? Assuming that there's a fair amount of margin, and that this is going to be a big project, I would get the property under contract and then reach out to other experienced investors that will fund and rehab the project in exchange for 50/50 split. That way you get the funds and get the experience of rehabbing from someone with experience.
Jennifer - I read your posts on the other thread you started, as well. For starters, I always like to go back to basics when I'm stuck on something.
You are either trying to buy an investment by getting either equity or cash flow at a discount. Better get a handle on the numbers first so figure out what fix up costs will be and the gross rents and estimated expenses. It's easy to get caught up in the opportunity to buy the asset, however you really do need to know what you expect to end up with.
Perhaps it's like buying a classic or older sports car. Except that you can't drive a five-plex (although an old Ferrari doesn't throw off cash flow, either).
As for tying up or controlling a property such as the one you have your eye on, that really isn't that difficult. If you are serious about taking action and not just romancing the idea of being an investor, then you could, as mentioned earlier, use credit card financing for all or part of the purchase price.
Of course, now you'd be in the same spot the current owner is in...the proud owner of an investment asset that does not produce cash flow or profit(s).
A hard money lender may get you the funds needed for renovation, however they will want you to have substantial "skin" in the game. I believe FHA still offers 203K program funds, however I can't recall if they apply to over 5+ units. Some regional grant programs may be offered, too. Maybe your contractor friend could be your sweat equity partner.
All-in-all, the simple fact is that you may not be able to monetize this opportunity yourself without having the resources to acquire, plan, renovate and manage this project. I would put this on par with teaching 7th graders in a very hostile environment like [insert city here]. You still up to it?