Property Evaluation

4 Replies

[b]It's a 4 unit. 2 of the units are apartments while the other two are commercial units. They're renting out 3 of the 4 units as apartments and the last one is for storage. I saw it online and figured it would be a good experience to take a look at it.

I met the realtor there. The property manager showed up next. She walked us around the property.

It's a brick building built in 1920. Is that too old?

The storage unit had A LOT of flies in it. She said that those would be taken care of easily though with a bomb. There was a ton of stuff everywhere from the tenants. I guess it is a storage area though. Inside the storage area, the ceiling needs to be finished. It looked like the pipes and everything was ok but the tiles need to be put in. The floors in the storage area need to be completed as well.

The other two units were ok just messy because of tenants. It's definitely a project. I couldn't see the last unit because the tenant wasn't there I guess.

I figure, I go in and rehab the storage unit and I could turn that into another unit or an office space. I'm not sure.

The realtor told me that it is zoned for commercial use and I'd have to get that rezoned. He didn't seem like he really knew anything about that though.

Sale Price: $50,000
Unit 1: $500
Unit 2: $435
Unit 3: $300

Monthly gross would be $1235

Taxes: $863 every 6 months so $1726 per year

Things I need to do and questions...

Check with a title company to see if there are liens on it. Right?
Find out the cost of utilites.
Go through with a contractor and see if I'm missing something.
Rehab the storage room and the bathroom. Probably put carpet and a ceiling in it. I have no idea how much that would cost. The manager told me that she knows contractors that she could recommend.
Is it a bad idea to go with someone she recommended?
The tenant renting for $435 has been there 4 years but the other tenants are newer. Do I just ask for deposit slips or a bank statement? Would things change since 2 out of the 3 tenants are within the last year?

A 4 unit with 2 residential and 2 commercial? I think the first answer will be what can you do in the context of current zoning and use. Make sure you know exactly what you can and can't do and I'd check with the city/town to get the correct answer.

Yep, mixed use buildings can be good and bad. Check the town zoning classifications for this property. Can you do retail? Restaurant? You maybe only stuck with 2 residential apts and 2 offices. Nothing wrong with that unless the area doesn't support this.

I agree with @Chris Martin that knowing the building's "use" within zoning regulations is important. Just don't let that hold you back from implementing a higher and better use.

Check out @J Scott's analysis here
http://www.biggerpockets.com/files/user/JasonScott/file/13-rehab-analysis-spreadsheet---basic

Just as an update, it wasn't zoned properly. I called the city's department that was responsible for zoning and they said that because the building is so old that it was never zoned approriately. To be more specific, it is zoned as a commercial building but it doesn't have the adequate parking to deserve its zoning classification.

What are my options?

I could pay close to $2000 to go to some board to get it rezoned. There is no guarantee that the board would grant me the authorization. I'm out the money if they do or if they choose to decline my request. I do not have to be the owner to go through this process.

I decided not to go through with it. It's not worth it to me.

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