Help Me Think Through My Investment Property in Central Mass

[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.

[Maverick Shah]

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!