Alright gang. I've recently been presented an opportunity to buy an unlisted property in my home City, a City that has been experiencing rocketing rents and property values. The seller and I agreed on a price, and I approached several local lenders only to find that they would not finance this property, for a few different reasons.

Property Details:

This is a "2-unit" building, technically. For 80 years the 1st floor was occupied by a Deli and Grocery that the building owner ran. It has been closed for 12 years, but still contains a large walk-in cooler and some display shelving, and has no bathroom. Obviously this was strike one with the Banks. Once these items are removed it is essentially a 900 sqft room with high ceilings and wood floors; it could be a chic studio. Worth noting is that there IS an interior staircase that joins 1st and 2nd floors. In order for the 1st floor to be a habitable unit, I'd need a kitchen and bathroom installed. More on this later. Also, it has a massive attached 3-car garage.

The 2nd floor has a 900sqft living space with 3 small "bedrooms" that is generally very nice; crown molding, ceiling medallions, mantels, typical 19th century City charm. The caveat being that the bathroom has never had a sink in it, and the kitchen has never had traditional counters. Strike 2. With $2-$3k of DIY work, this unit would be lovely and my goal is to occupy it.

Money Details:

We agreed on $100k when financing was on the table. If both units were renovated, each would eventually rent for ~$900, plus garage income if I wanted. 

Buying Options:

Here's the fun part. I need to decide whether to 1) Walk Away, 2) Use a Homestyle Rehab Loan and accept that using this lengthy process will likely add $55k to the loan and put me at the mercy of the Bank and GC's, or 3) Buy with cash (hopefully for even less), slowly renovate out-of-pocket/DIY, and then do some sort of Cash-Out Refi, whether Delayed Financing Exception or otherwise once the building is in a condition where an Appraiser and Bank will like it.


Buying this in cash will consume nearly all of my liquid savings... How do I know that my DIY work will be approved by an appraiser? Would it be easier to just make the 1st unit part of the 2nd, and go single fam? The time, effort, and money involved in converting the 1st floor. This is a fairly hot area, and opportunities like this are rare. 

What say you, BP Brain Trust? Some photos of 2nd floor only are attached.

Small Living room Weird Kitchen Living Room into Dining Room