One minute background: my brother and I have been investing for three years, have 5 properties 7 units with a total value of about a million dollars. There is currently a historic building for sale in Phoenixville Pa where we invest that is in disrepair. The area is up and coming(actually is) and this property is right on the edge of where new investments are currently being made. The building has 29 rooms (5 1 bedrooms, 15 efficiencies with no kitchens, 9 single rooms that share three bathrooms, a bar and a deli and is 10,000 square feet. The property has the ability to use a hotel liquor license which can be renewed for $7,000.00 where a new liquor license in the county normally costs $250,000. The property is for sale currently for $550,000 and has an ARV of about $1.6-1.8 million. We have good contractors we used on our last project and they quoted $350,000 (they are good AND cheap) for the renovation for the property as is, but we would probably add kitchens to the efficiencies and make the 9 singles into three two bedroom units. We calculated $25,000 gross rent a month total after the renovation and used a renovation cost of $575,000.00 for our calculations. We were planning on using hard money of $800,000 and $200,000 of private money to cover the purchase cost and renovation (I've spoken with the hard money lender who is on board and am speaking with current and potential private investors) then planned on refinancing once we finished. So, the questions: Would the bank require a seasoning period for the refinance? What are things we should consider that could go wrong?(asbestos, issues with old buildings etc) I have spoken with the borough and they would be in favor of us putting pretty much anything there. Would love any and all thoughts! Thanks in advance!
Erich, you had me at historic... About all I would add is to meet with several pros, like an architect with experience in this area, lenders, environmental firm, for lead asbestos, etc, engineers to make sure the place is even sound, subs in all areas, etc...etc.. It is a big jump from a few residentials into commercial and your ability with construction may be the key to success here.....personally I would play to your strengths and increase rentals in newer, well maintained residentials......but it could be high risk, high reward as you mention, netting you millions over time or driving you into bankruptcy with an environmental hazard or demolition candidate....
So I just spoke with the selling agent who said they are considering an offer at $275k. Any thoughts on the new price? If anyone has thoughts please post!
@Erich Beyer I see this thread is a year old... what happened to this deal? did you buy it? if not what did the buyers do to the property? I am looking at a similar deal in Chambersburg PA and was curious. thanks!
Did not buy it. It's going into foreclosure.