Help Me Think Through My Investment Property in Central Mass

Worcester, Massachusetts
Rehabbing & House Flipping
1yFollow

Help Me Think Through My Investment Property in Central Mass

Maverick Shah
Member since 2024 · 8 posts · 4 votes

Hey all,

Looking for some advice or creative solutions from those who’ve been in similar shoes.

For my first project, I bought a mixed-use property in central MA about a year ago for $70K. It's on a small 2,500 sqft lot and currently has a commercial storefront on the first floor and one apartment that spans the second and third floors. The plan was to rebuild: keep the storefront on the first floor and add one 2-bedroom apartment each on floors 2 and 3.

Here’s where things went sideways:

  • The property has been vacant for over 2 years, which means if I demolish the current structure, I lose my grandfathered zoning rights and will have to rebuild under the new code.
  • After speaking with my structural engineer, the foundation is shot and can’t handle the load for a rehab — so the only feasible path is full demolition and new construction.
  • Estimated rebuild cost is ~$650,000, and I’m already in for $70K on the land. So I’d be all in at $720,000, while comps suggest the new building would be worth only around $550,000.
  • A bank won't finance the full project since the after-repair value (ARV) doesn't justify the cost. Best case, I'd have to bring $300K+ of my own cash, and I honestly think I’d be better off using that money on another property that actually cash flows from day one.

So that brings me to where I’m stuck:

  1. Do I cut my losses and try to sell the lot/building as-is?
  2. I would love to make this work but with the current plans of 1 store and 2 apartments, it looks difficult. What else can I do? What would you do?
  3. Anyone else go through something similar — any lessons you can share?

This project has been a massive learning experience already — I’ll consider it an MBA if I walk away — but I want to make the smartest next step from here.

Appreciate any thoughts, connections, or ideas you all might have.

0Reply
31 views

9 Replies

Jump to latestLatest
  • Payton HaightBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2021 · 124 posts · 86 votes
    1y

    Hi Maverick, I don't know enough details about your deal to give direct advice and am not a structural engineer, but my initial thoughts are: 

    What can you sell the property for now? I would assume it is worth something so you're not really out $70k and I would hate to see you put $720k into a deal that you know is only going to be worth $550k. Don't let the sunk-cost fallacy pull you in deeper trying to force a deal to work. 


    A few other questions/items to think through on the deal:

    1) What are your projected numbers for the mixed use building (1 store + 2 apartments)? Would they support the investment you are considering putting in to the deal?

    2) With the foundation issues, is the current building uninhabitable or is there any opportunity to rehab and rent it out as is?

    3) Have you gotten a 2nd opinion on the foundation to confirm it cannot be repaired? I have gotten drastically different opinions from professionals in the past so it can be good to get a few opinions before taking any drastic actions.

    4) What is the land zoned for now and does it make more sense to rebuild something else that fits the current zoning? If not, you may be able to get a zoning variance if it made sense to re-build something on the property.

    Good luck!

    [email protected]380-324-0445
    0Reply
    • Maverick Shah
      OP
      Member since 2024 · 8 posts · 4 votes
      1y
      Hi Payton, 
      1. to build Commercial plus 2 apartments, it will cost me around $650k including demo and new foundation. I have been thinking about just building a SFH instead. I've been quoted around $375k. 

      2. completely uninhabitable

      3. Yeah multiple engineers said we'll need a new foundation.

      4. It's C1, can do SFH, various businesses, and mixed use. 

      While SFH is going to be the cheapest option, the demo and new foundation is adding a lot to the cost. I might simply sell the land and cut my losses at this point. 

      I appreciate you taking the time to respond. 

      Quote from @Payton Haight:

      Hi Maverick, I don't know enough details about your deal to give direct advice and am not a structural engineer, but my initial thoughts are: 

      What can you sell the property for now? I would assume it is worth something so you're not really out $70k and I would hate to see you put $720k into a deal that you know is only going to be worth $550k. Don't let the sunk-cost fallacy pull you in deeper trying to force a deal to work. 


      A few other questions/items to think through on the deal:

      1) What are your projected numbers for the mixed use building (1 store + 2 apartments)? Would they support the investment you are considering putting in to the deal?

      2) With the foundation issues, is the current building uninhabitable or is there any opportunity to rehab and rent it out as is?

      3) Have you gotten a 2nd opinion on the foundation to confirm it cannot be repaired? I have gotten drastically different opinions from professionals in the past so it can be good to get a few opinions before taking any drastic actions.

      4) What is the land zoned for now and does it make more sense to rebuild something else that fits the current zoning? If not, you may be able to get a zoning variance if it made sense to re-build something on the property.

      Good luck!


      1Reply
  • Nick Maugeri
    Real Estate Broker · Modesto, CA · Member since 2023 · 192 posts · 77 votes
    1y

    If your property is in an area the city is trying to redevelop - see if they can assist, there may be grants, etc. Otherwise, cut your losses and move on. A CBA or IRR analysis will point to this strategy as well.

    0Reply
  • Brandon Croucier
    Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes
    1y

    Sell & cut your losses or just hold the land until you can sell for over your breakeven . Do not throw more money in a sinking deal.

    0Reply
  • Jaycee GreenePro Member
    Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
    1y
    Quote from @Maverick Shah:

    Hey all,

    Looking for some advice or creative solutions from those who’ve been in similar shoes.

    For my first project, I bought a mixed-use property in central MA about a year ago for $70K. It's on a small 2,500 sqft lot and currently has a commercial storefront on the first floor and one apartment that spans the second and third floors. The plan was to rebuild: keep the storefront on the first floor and add one 2-bedroom apartment each on floors 2 and 3.

    Here’s where things went sideways:

    • The property has been vacant for over 2 years, which means if I demolish the current structure, I lose my grandfathered zoning rights and will have to rebuild under the new code.
    • After speaking with my structural engineer, the foundation is shot and can’t handle the load for a rehab — so the only feasible path is full demolition and new construction.
    • Estimated rebuild cost is ~$650,000, and I’m already in for $70K on the land. So I’d be all in at $720,000, while comps suggest the new building would be worth only around $550,000.
    • A bank won't finance the full project since the after-repair value (ARV) doesn't justify the cost. Best case, I'd have to bring $300K+ of my own cash, and I honestly think I’d be better off using that money on another property that actually cash flows from day one.

    So that brings me to where I’m stuck:

    1. Do I cut my losses and try to sell the lot/building as-is?
    2. I would love to make this work but with the current plans of 1 store and 2 apartments, it looks difficult. What else can I do? What would you do?
    3. Anyone else go through something similar — any lessons you can share?

    This project has been a massive learning experience already — I’ll consider it an MBA if I walk away — but I want to make the smartest next step from here.

    Appreciate any thoughts, connections, or ideas you all might have.

    Hey @Maverick Shah, welcome to the BP Forum! By any chance, are you from the area where this property is located?

    [email protected]
    0Reply
    • Maverick Shah
      OP
      Member since 2024 · 8 posts · 4 votes
      1y
      Quote from @Jaycee Greene:
      Quote from @Maverick Shah:

      Hey all,

      Looking for some advice or creative solutions from those who’ve been in similar shoes.

      For my first project, I bought a mixed-use property in central MA about a year ago for $70K. It's on a small 2,500 sqft lot and currently has a commercial storefront on the first floor and one apartment that spans the second and third floors. The plan was to rebuild: keep the storefront on the first floor and add one 2-bedroom apartment each on floors 2 and 3.

      Here’s where things went sideways:

      • The property has been vacant for over 2 years, which means if I demolish the current structure, I lose my grandfathered zoning rights and will have to rebuild under the new code.
      • After speaking with my structural engineer, the foundation is shot and can’t handle the load for a rehab — so the only feasible path is full demolition and new construction.
      • Estimated rebuild cost is ~$650,000, and I’m already in for $70K on the land. So I’d be all in at $720,000, while comps suggest the new building would be worth only around $550,000.
      • A bank won't finance the full project since the after-repair value (ARV) doesn't justify the cost. Best case, I'd have to bring $300K+ of my own cash, and I honestly think I’d be better off using that money on another property that actually cash flows from day one.

      So that brings me to where I’m stuck:

      1. Do I cut my losses and try to sell the lot/building as-is?
      2. I would love to make this work but with the current plans of 1 store and 2 apartments, it looks difficult. What else can I do? What would you do?
      3. Anyone else go through something similar — any lessons you can share?

      This project has been a massive learning experience already — I’ll consider it an MBA if I walk away — but I want to make the smartest next step from here.

      Appreciate any thoughts, connections, or ideas you all might have.

      Hey @Maverick Shah, welcome to the BP Forum! By any chance, are you from the area where this property is located?


       Hi Jaycee, my primary residence is 50 miles away from the property. 

      0Reply
    • Jaycee GreenePro Member
      Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
      1y
      Quote from @Maverick Shah:
      Quote from @Jaycee Greene:
      Quote from @Maverick Shah:

      Hey all,

      Looking for some advice or creative solutions from those who’ve been in similar shoes.

      For my first project, I bought a mixed-use property in central MA about a year ago for $70K. It's on a small 2,500 sqft lot and currently has a commercial storefront on the first floor and one apartment that spans the second and third floors. The plan was to rebuild: keep the storefront on the first floor and add one 2-bedroom apartment each on floors 2 and 3.

      Here’s where things went sideways:

      • The property has been vacant for over 2 years, which means if I demolish the current structure, I lose my grandfathered zoning rights and will have to rebuild under the new code.
      • After speaking with my structural engineer, the foundation is shot and can’t handle the load for a rehab — so the only feasible path is full demolition and new construction.
      • Estimated rebuild cost is ~$650,000, and I’m already in for $70K on the land. So I’d be all in at $720,000, while comps suggest the new building would be worth only around $550,000.
      • A bank won't finance the full project since the after-repair value (ARV) doesn't justify the cost. Best case, I'd have to bring $300K+ of my own cash, and I honestly think I’d be better off using that money on another property that actually cash flows from day one.

      So that brings me to where I’m stuck:

      1. Do I cut my losses and try to sell the lot/building as-is?
      2. I would love to make this work but with the current plans of 1 store and 2 apartments, it looks difficult. What else can I do? What would you do?
      3. Anyone else go through something similar — any lessons you can share?

      This project has been a massive learning experience already — I’ll consider it an MBA if I walk away — but I want to make the smartest next step from here.

      Appreciate any thoughts, connections, or ideas you all might have.

      Hey @Maverick Shah, welcome to the BP Forum! By any chance, are you from the area where this property is located?


       Hi Jaycee, my primary residence is 50 miles away from the property. 

      @Maverick Shah Unless you think there's the property retains some intrinsic value in the community (so that you can obtain a subsidy or other municipal funding), I'd sell and cut your losses. 

      [email protected]
      0Reply
  • Maverick Shah
    OP
    Member since 2024 · 8 posts · 4 votes
    1y

    Yes, my primary residence is 50 miles away from the property if that helps. 

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    1y

    @Maverick Shah 
    I don't see the option to simply keep it as one storefront and one apartment, and cosmetically fix it and rent it or sell it. You can certainly do a 1031 exchange if you decide to sell. But you're not going to turn an orange into an apple.

    There is no short-term path to create your envisioned scenario and bring in a profit for a long long time. Better to stabilize and sell for what you can. I would imagine there is some appreciation from the $70K purchase price.

    A 1031 exchange allows you to defer all of the tax and depreciation recapture and reinvest it into another investment property. Now you have a greater down payment to work in your favor, and put towards an investment property with better potential.

    The 1031 Investor5137 Reviews
    WebsiteView Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free