I have made a major newbie mistake. I presently live in a condo for the past 17 years. In 2013 I purchased a 2-family that needed some major work. Over the past year I replaced the roof and updated the electrical so now all the wok that is needed is drywall, plaster, flooring, and windows in a historic district. I am paying two mortgages and my credit has really taken a big hit. I bought the building for $55k and the ARV would be around $130K. I need serious help in getting this building up and running so I can clear up my credit and make better decisions in real estate and create my retirement wealth. Can you give me any advise for a cash poor investor in need of capital and in search of a partner. I was told that the estimated cost to repair my building would be around $30k, which would cover carpentry such as doors, flooring, updating the kitchen, windows, and drywall. How do I go about finding an investor? What is the procedure? How do you write a partnership agreement and select the terms for the partnership? I do not want to sell my building I just want to bring it up so I am not making two mortgage payments and can start rebuilding my credit to build wealth. Do you have any other ideas that may help a person in my situation. I do not want to plead bankruptcy because that will hurt me for many years and I would lose my building. Your advise would be extremely helpful. My mortgage payment is presently $485.00 per month and the rents would go for $650 upstairs and $600 downstairs. I am in a situation where no bank would give me a loan.
Steven L. Haskins
Where is your building located?
St.Louis, Missouri - Benton Park Neighborhood historic district.
dose this building fall under historical rehab tax credit or can you put in place cheaper material and do capital impovements along the way thier many ways to save money on rehabs just depends on how much labor you want to add thier are many second hand supply warehouse in STL and surrounding area I understand the money hardship and bankruptcy will destroy you ( been thier done that, not cool) you can look at hard money or saving money on labor and material by doing it yourself just some ideas. .... good luck steven
When I purchased the building in 2013 I used hard money to replace the roof. I have done a great deal of the work myself. I am now in a situation where everything is carpentry related. Presently, I am reading up on flooring. January I will start tearing out old fixtures in the bathroom, refinishing the tub and laying backerboard and ceramic tile. The area is in a historic district but the issue I have is that I must live in the building in order to be applicable for any type of benefits. I can't live in the building if it won't pass St.Louis City inspection. So I need to get the building good enough for me to live in and pass inspection. In the historic district the front windows must be all wood. I have received estimates as high as $6500 just to replace the 5 windows on the front just because of the oval shape of the windows. I am in a serious bind. I just need to hang-on until I figure something out.
@Steven Haskins , had you come to me for advice prior to buying a historic building, I would have told you to run as fast as you can away from the deal. Historical buildings should not be a first project for a new investor. There are way too many issues that can occur with a historical building.
Now, having said that, I will tell you that I did not have anybody to advise me when I first got into investing and I too chose a historical building to rehab. Sometimes the best way to learn is from your mistakes.... Here are a few of my thoughts and suggestions:
I ran into the same issue you are having with the windows. I had converted the attic into a master suite. The stairs leading up to the attic were in a turret and there were 3 original windows that had the wood lattice trim. Each little section had its own piece of thin glass. As you can image, the wind blew through these windows like they weren't even there! I had to present to the historical society my plans to replace the windows with new, triple pane, vinyl windows. They laughed at me and said, "Hell No!". I was only allowed to replace the windows with wood windows that were going to cost me nearly 10x as much as the vinyl windows (and they would be way less efficient). I couldn't afford it, so I did a little research and some creative thinking and I came up with the idea of leaving the original windows, and essentially building another window behind the original window using Plexiglas. The historical society was happy with this because from the outside of the house, all you could see were the original windows. From the inside, all you saw was the new framed in window that looked like it was a double pane window. It still wasn't as efficient as new windows would be, but it was 100x more efficient than the original windows and it cost me less than $100 in material per window.
I know St. Louis has more restrictions when rehabbing buildings than Kansas City does, so this might not be a viable solution for your window issue. If you can do something like what I described, feel free to message me for more details about what I did. Think about my story above and try to apply that idea to other areas of your rehab to cut your costs. Check your local Habitat Stores for used material. I have replaced entire kitchen cabinets and counter tops for as little as $300 by buying from the Habitat Store. Do you know any other rehabbers in St. Louis? If you do, call them up and see if they are doing any kitchen replacements and see if you can have the old cabinets. A lot of rehabbers just rip out the old cabinets and then pay to throw them away. You would be saving them money by removing them yourself. Same with bathroom remodels. Get Creative!
Is there anything in your bid that you really don't need to do but want to do, such as updates that are not required by code? If so, take these out of your bid. You can always do them later.
Does SL require you to get some type of occupancy certification before anybody can live in the building? In KC, you do not need this for 1-4 unit buildings. If you don't need it, then move yourself into one of the units and rent your condo. Then you will be down to 1 mortgage and you can work on getting the 2nd unit up and rented. If you do need the inspection approval, must it be for the entire building or can you do just one unit so you can get it rented while you work on the other? Exhaust every possibility before you give up!
As for partnerships, the easiest thing to do that will offer good protection, is to form a Joint Venture (JV). I'm assuming you have your building in a company name. The JV would be between your company and whoever's company you decide to partner with. You will need to think about what you want to give up in exchange for the money. Are you giving up partial ownership in the property? Are you giving up profits? Are you just paying back a loan? Whatever you decide, pay a few hundred bucks to get a lawyer to write it up. DO NOT form a JV or a partnership with somebody without having your own lawyer look over the paperwork!
I hope this helps. Good luck, and don't give up. You have to fail before you can truly know what success is.
@Chris Dawson Thanks. This is very valuable information. I was wondering if you could contact me with more details on what you did for your windows instead of replacing them? Thank You.