Quote from @Tim Blanchard:
Quote from @Stephanie P.:
Quote from @Tim Blanchard:
Looks like our next deal is happening!
We're buying this unique piece of property that was at one time a popular retail location that sold marine/fishing gear. It's got a great foundation as well as a house on the other side of the property that we're looking to rehab and rent (long term) to carry the holding costs while we figure out what the heck to do with the commercial part. We're doing a cash deal for the property (HELOC money) but want to finance the rehab of the house (~$150k). We're confident that the ARV on the house alone is well above what we're paying for the whole property plus the rehab costs.
There are a ton of lenders out there with these “fix n flip” loan products but I’m apprehensive about engaging them since their terms seem pretty aggressive and we’re really looking to hold on to the property to cash in on the long term use of the space.
I would love to hear any suggestions on how to run the financing on this bad boy…
Initial purchase price - $160k (we've got HELOC funds for this but could go a different direction if it makes sense).
Rehab on house - $150k (realistically more like. $100-$120k but playing it safe).
ARV (on house alone) - $400k
Hey Tim
Welcome to BiggerPockets
Don't take this wrong, but you've got a mess of a property and will have a very difficult time finding financing for it.
On one hand, you've got a retail space that probably has a decent location with good bones as they say. You have no experience buying retail commercial space though and you're going to encumber your primary residence with a HELOC to buy it.
The bonus to this purchase is there's a house that needs total renovation on the other side of the property. The ARV on the house is 400K by itself, but it's probably not by itself (meaning it's on the same parcel as the commercial building). If it's on the same parcel, you have a mixed use property that needs renovation and those loans are very difficult to come by. This one in particular, as you describe it, is going to be virtually impossible to comp for the appraiser to get value. It's going to require a commercial appraisal and the residential portion is going to be subject to instead of as is value.
Go to your local bank and see if they'll finance this for you.
Go to the planning and zoning office and see if you can subdivide the property to get two parcels splitting the residential and commercial pieces. That would be the only way I see this getting financed.
Best of luck
Stephanie
@Stephanie P: A lot of assumptions being made there but thanks for the comments nonetheless ;-)
Subdividing would be an amazing move I just dunno if the county would slow roll that process like they do everything else.
We're more looking for the refi options after rehabbing the house and "cleaning up" the commercial space.
We're buying this whole property for less than 50% it's value so we're coming into it ahead.
Sorry about all the assumptions @Tim Blanchard:)
I think, if you do acquire it, subdividing it would be the best way to get suitable financing. Separate, it's a great deal, but together, I'm not sure there's a lender for it (even hard money) other than someone local. Mixed use is one of the most difficult loans to place because the comps are sometimes non-existent, the cash flow could be less than desirable if there are newer more desirable properties close by or zoning could be a problem; all of those come into play when determining value.
You may find that subdividing it is in the best interest of the county if it's currently legal, non-conforming. They may want it to be subdivided to come in line with current uses.
All the best. I hope it works out.
Stephanie
