Greetings BP people. I have a possible deal on a 8 unit apartment building, could make into a 10 unit easily. The project will require full interior completion and some exterior work as well. Basically it's just a shell and needs finishing.
I have run the numbers and the property will cash flow very well after rehab using conservative numbers. I'm acquiring bids from several local GC's and should have those within a week or so. My past experience as a GC gives me some idea of the cost but I want some local eyes on it. Property is located in Florida near major city.
I am able to purchase the property but I will need to a partner or investor to cover the rehab portion. This will be my first large apartment deal so any advice or suggestions are appreciated.
I'm ready to move on this deal but I need some help. I'll do the leg work and oversee the project from start to finish. Upon completion the property will be professionally managed.
Let's do this.
Thanks,
Chris
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
I would lease it, with an option to purchase based on 70% of the ARV. This way, if the project never gets completed, you don't own it and you can walk away. In that condition, it probably is not financeable. The lease allows you to use your money for repairs, get renters in there, and increase the value. Then you can get a traditional commercial loan for it. In the meantime, you control the property and nobody else can buy it. You could also fix it and then sell it for more than your contracted price without ever owning it.
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
I would lease it, with an option to purchase based on 70% of the ARV. This way, if the project never gets completed, you don't own it and you can walk away. In that condition, it probably is not financeable. The lease allows you to use your money for repairs, get renters in there, and increase the value. Then you can get a traditional commercial loan for it. In the meantime, you control the property and nobody else can buy it. You could also fix it and then sell it for more than your contracted price without ever owning it.
@Anthony Dooley thanks for your reply. Can you expand on your idea more? How exactly would I go about getting the money to do the rehab? As I mentioned, it's basically a shell and needs completion from top to bottom..
I like the lease with option idea though..
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
@Chris Ward You need money to invest. This would be your money or OPM. Based on the Rehab and ARV, this property isn't worth $70K to me. It is a full time job for the next year or two. The seller should beg you to lease it. It is the only way they will make money on it in the near future.
This project may be too big for you to fool with. It will be a long time before any money comes back to you. You may need to rehab just one unit, rent it out, then save up some money and rehab the next one. At first it is slow, but after you have 5 of them rented, the savings rate will be much faster. If the foundation, Plumbing, electrical, and roof are already there, each unit should be no more than $10K to rehab. That would be $80K. For $300K, you could build an 8 plex in TX.
Investor · Crosby, TX · Member since 2017 · 4 posts · 0 votes
9y
@Anthony Dooley the property needs electrical, plumbing and hvac so that kicks up the cost significantly. I was figuring 6-8 months for completion. This property has been sitting for quite some time and the holding period and cost to rehab may keep it sitting..
@Anthony Dooley the property needs electrical, plumbing and hvac so that kicks up the cost significantly. I was figuring 6-8 months for completion. This property has been sitting for quite some time and the holding period and cost to rehab may keep it sitting..
That's why it's still on the market - it's not good. Money doesn't matter - there are plenty of people investing in Florida with cash. I know investors from Ohio who pay cash $500K there when it worth it. The returns as cash flow in FL is not that big but the appreciation is always good (unless there is a bubble burst).
You definitely miscounting some numbers - property taxes are high in FL because there is no state income tax.
Management companies charge a lot and don't do much for the money, every light bulb replacement costs you dearly.
Unless you plan to move there and do your own PM, that's to going to be a good project
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
@Chris Ward How much are you willing to pay for this? No bank will finance it, so you will need to partner with a private money person to fund this. The reason it's been sitting for a while is that it isn't worth anything and most people don't have $300K in rehab money sitting in their checking account.
I would pass on it. You could probably go find an 8 plex that is already rented out for $300-$400K and start making money next month.
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
@Chris Ward 330 N. Perez St. South Houston $350,000. I would guess that property will go up due to the lack of housing in certain areas. Might I suggest buying a water damaged house for $30K, fixing it up, and renting it out. Then repeat 100 times.
Investor · Crosby, TX · Member since 2017 · 4 posts · 0 votes
9y
@Anthony Dooley, good suggestion, I will look for something better as it seems you are correct about not being able to finance this and the likelihood of something better being out there. I appreciate your insight and wisdom.
@David Roque, no I'm not in contract, just trying to do my research and due diligence before I pull any triggers. Thinking this one is not right for me.