Would you take on this project?

[Alecia Loveless]

I have been offered an offer market opportunity. It is a 7 unit property. 3 units are intact and need some cosmetic work to get rentable. 4 units are gutted to the studs but framed In to begin the renovation.

Still working on final estimates but the 3 units rented would just support the mortgage debt during the construction phase. Taxes, insurance, and any other expenses would have to be out of pocket.

When completed and fully rented would turn a 20.2% CoC return the first year.

I’ve done some small renovations before but this would be much more extensive. My contractor is on board with the project and is excited to get it going.

Do you have any advice for me regarding pulling the trigger on this project or any tips on the process?

[Andy Sabisch]

Whew . . . sounds like a big project ahead.  Have you laid out a solid timeline to cover all parts of the project?  Has your GC done anything of this scope before?  I might be excited about a project but I would temper that with past experience.

Things you need to consider:

1) If you are doing construction on the 4 units, will the tenants in the other 3 be happy with the construction noise going on next door?  Might impact your ability to rent the three to cover the mortgage?

2) You mentioned costs other than mortgage being out of pocket - what are your reserves and how long will they cover the costs you project with a healthy contingency?

3) Permits . . . what will you need and how much time will they add to the process?  Bit us in the past so a word of caution on a total rehab.

4) As Henry said, insurance is a must and you need to make sure everyone working on the project is insured and for trades, licensed especially if permits are required.  Saving a few $$ on this end will usually cost you many times that clearing permits. 

5) You need to be certain that the location supports the investment into the project.  Sounds like rehab had been started but stopped for some reason . . . can you find out why?  There may be more to the story than it will be a great deal when done,