Deal Analysis & Financing Advice on a 100 year old 2-unit
Hi all!
Could use some analysis and financing advice.
Looking to buy a historic duplex listed at $470k, 2768 sq feet total.
It's in a Maryland beach town that has STR, MTR, and LTR needs. I want to purchase as a house hack - live in one side, rent out the other.
I'm underwriting as an LTR ~$2200/mo (conservatively) - for the 3BR/1BA side.
It's a solid house buuuut... it needs work (mostly cosmetic + 1 kitchen + cooling). I made a spreadsheet that would make even Henry Washington cry 'proud papa' tears and walked the house with my husband.
On the high end, if we hired contractors for everything, it needs about $215k+ (again, its 2 ~1500 sq ft houses). On the low end, if we DIY'd everything from plaster outward its about $110k, and within our experience.
But the comps are thin because it's a pretty unique situation so struggling to determine ARV - best guess:
Conservative: about $625K
Working/base case: about $650K
If renovated really well and the two-unit setup is viewed favorably: about $650K–$675K
Strong execution / very good market response: maybe $690K–$700K
So far, my local intel says there are three offers on the house (all due the 20th) - one for asking, one for above, and one verbal, and one of those is no contingencies.
I have about $100k in cash and pre-approved for $475k at 5% down conventional and $575k with 10% down bank statement loan, but neither took the potential rent into consideration.
I think this a deal worth pursuing since we are renting now and and our effective housing costs would not increase (if we LTR) but have the potential to be reduced if we create success as an STR. There's so much sweat equity opps and even some value add opps (another bathroom) and it would improve our quality of life getting to live in a place we love that's growing in value because of desirable location.
But:
1. What loan structure would help me preserve as much cash as possible for renovation?
2. What offer would be competitive but not blow the math?
I was considering looking for short-term acquisition financing for an owner-occupied 1–2 unit residence, (with a documented bank-statement mortgage takeout?) that would allow me to offer $450k "cash" and two weeks to close.
Is that nuts?
Most Popular Reply
Hi Piper, great find on a historic property with strong long term potential.
I focus strictly on financial underwriting and asset math rather than general contracting. Looking at the numbers you shared, the capital stack does not support the high end of your rehabilitation estimates.
If you purchase at $470k and contractor rehabilitation costs reach the $215k high end, your total project cost (TDC) is $685k. Against a working after repair value of $650k, the project operates at a loss before transaction costs. Even the low end DIY estimate of $110k puts your TDC at $580k, leaving a very thin margin for a historic property where unforeseen structural issues frequently arise.
Your total cash is $100k. Attempting a short term acquisition loan to present a cash offer creates a severe cash deficit. Hard money or bridge lenders require substantial liquidity, high origination fees, and large down payments. If you use your cash to acquire the property, you leave yourself zero reserves for the actual construction phase.
Conventional financing or bank statement loans do not solve the construction capital problem because they fund against current condition rather than future value. To preserve cash and fund the rehabilitation, you need a renovation loan product such as a Fannie Mae HomeStyle or FHA 203k loan. These programs finance the purchase and the construction based on the future appraised value, keeping your initial cash outlay tied strictly to the down payment percentage rather than out of pocket construction draws.
So, make sure your purchase price leaves enough cushion if you end up hiring contractors. Tight margins and limited reserves make heavy historic rehabs risky, no matter how great the location is. Let me know if you have more questions!