At what point is a property too far gone to rehab?
I found an 9 Plex, fixed up it could be worth about 400k based on income valuation. But it needs EVERYTHING. Place is a dumpy/disgusting, been vandalized, no floors, bad roof/ birds got in, kitchens barely exist, full bathroom reno, needs all new plumbing and electric, new roof, new windows, all appliances, obviously paint / fixtures/ doors etc. Only thing it really has going for it is sturdy plaster/ structural integrity. Honestly I'm sort of surprised it hasn't been torn down ( except that's gotta be expensive as hell). How do you figure a rehab cost for that? I figured easily over 100k just to make it habitable...but how much over? How do you determine if a building is Worth saving?
So I'm a sucker for a dump. It drives my partner crazy walking through some of these places. In my opinion, a building is only a wash when the numbers don't work in your favor. If your property is worth 400k and you have to put 250k into it, that's a win in my book. If you have to put 500k into a 400k property then it's not obviously. The other question that comes into play on a project like this is your ability to manage it. Obviously I don't know your experience level but a complete gut job and reno on a 9 plex is a large project. If you go for it, I'd love to follow your progress!
I wouldn't say I'm an expert. The project definitely scares me, I have done 2 houses ( now rentals) so far. But...there is a 5 Plex around the corner asking 550 right now. The other thing is I don't have the 200k in cash it would take to fix it...I could buy it ( seller financed) and fix the house in front, then use monthly income ( plus money from my other 2) to gradually do the big 8 Plex on back.
On a project of this scope, it's not really something you would want to do piecemeal. You would need to get someone in there to get it knocked out so that it can start generating income.
If the property is that bad, it may not be worth more than the land it sits on. However, that doesn't mean it's not worth fixing. You'd want to get a roof on it to get it stabilized. One thing about doing a complete rehab on a property like this is that everything is going to be new so your capex should be low for the next 10 years or more. Maybe need to find a partner to help fund it.
Definitely understand it shouldn't be done piecemeal. I could take out a HELOC on my private home for a portion...maybe also a loan...but I think it would still be short of the necessary funds. I think I'm gonna look for a partner.