I just got a verbal agreement on two properties with 5 active units and a potential 7 more.
Property one is a 4 unit multi-family that earns ~2600/ mo.
Property is currently zoned as business and has 1 unit rented that will cover the mortgage. However it has 7 one bedroom rentals in the back, a few which need to be rehabbed. The rub on this one is that in order rent the 1 bedrooms the property has to be rezoned to residential. The gamble I'm taking here is that I can get the property rezoned. The city has encouraged the current owner to put forth an application, but there are no assurances that the rezoning will be approved. The area is really good for residential rental, but commercial rentals in the area has not been the best.
Essentially I got the two properties privately financed as a package. I'm hedging the guaranteed earner against the rezoning. I'm head strong on this deal, but the numbers look good. I figure like Grant Cordone says, "you want new problems".
Now that I'm locked in my adrenaline has worn off and my nerves are getting the best of me. Someone please give me a pep talk.
Put it all on black!
Seriously, if the one property will carry it what's the worry? How much money will you have tied up in the deal? Can you get it out? What's your best case, worst case, and most likely case scenario? Are we talking losing a little bit of money worst case or lose your shirt?
I don't think I would do the deal if my only exit was the rezoning. If you can come up with some other potential options that work it might be worth it. It is always better to have multiple exit strategies. Put your thinking cap on and come up with some other things you could do to make this work or at least get out of it. Then you won't feel like you are doing my first comment.
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