All Forum Posts by: Tom Ashe

Thanks @Caroline Gerardo,

I'll give them a call and discuss the situation with them.  Thank you for your valuable input.

Best,

Tom

Hi @Brad Hammond,

Thank you for your reply.  

That was my take on it as well, since I am doing the value add and not purchasing the property as a rehab (3 units are in rentable condition right now with the other one occupied by a tenant), I figured my FHA loan would be fine. I'm not certain why my lender said I would need a conventional, but I hope to discuss with them later today. It sounds like if I have the PLAN to add units, I need conventional, but that doesn't necessarily need to be reported. Then when I sell, the buyer would need a conventional loan.

Hi Caroline,

Thanks for your input!  I have answers to most of these questions.  For reference, I'm in the Portland, OR market.

I've been approved for FHA, and my intention was to put down 5%. The question I had regarding conventional, was that my lender said I would need one if I converted the property to a 6plex (I don't know if I need it initially, or if I need to transition into one once the project is complete and the house is reappraised). I hope to have a call with him later on the specifics.

In regards to cash, I have a significant portion of the funds necessary for the project.  I have have been working professionally and investing in the stock market for a while but am just now getting into real estate.  Additionally, I have a contractor who may be willing to partner on the project.

The plans for the 2 additional units have already been approved by the city and permit had been approved as well, but have since expired (I imagine the owner tried to do everything themselves and gave up).  They are engineered plans. 

To give some numbers, it's very difficult to find solid cash flow in my market (HCOL), and this project seems interesting because it pops the equity and also turns the property to a healthy cash flow.  I can make it work right now managing myself (which I intend to do starting out).  I would purchase this property for about 800k, 3.5-5% down, and I imagine after the remodel the value of the house would sit approximately 1.2M.  My intention was to finish the remodel immediately while living there, then move onto cash out refi, splitting the lot, and/or partnering with a developer.

In regards to the lot split, I have reached out to the city and expect a call back in a few days on feasibility.

Hi all,

I'm a first time real estate investor and I'm working on my first deal.  I was able to find this off market in a HCOL area, and it's providing a couple of very interesting value adds.

1) It comes with plans to add two new units within the existing structure on the bottom level.  Based on some contractor estimates, I believe I could get this done for under 150k, potentially under 100k (I have not seen the inside of that part of the property yet), and increase home value by approx 400k.

2) potential to split the lot, and sell the land separately (zoned as 3 story max multifamily).

My issue is regarding item 1.  My lender told me that the conversion of the property to a 6plex would cause me to need a commercial loan, but I haven't been able to discuss this with him yet.  My initial idea was to update, cash out refinance, and then have good cash flow and move to another deal, but the loan may be difficult to manage (I have a call with him later).

My question: Does anyone have experience converting a residential multifamily to a commercial? On a FHA loan? Any creative ways that I can avoid the 20% down payment and still get in here? I'm intending to owner occupy, but if the only option is to flip it, I'd consider that as well.

Thanks for your input!