AWESOME DEAL with some complications - I NEED HELP - Posted by G. Thompson
Posted by G. Thompson on March 18, 1999 at 23:06:33:
I’ve been involved with real estate investing since 1995. Now I do it full time. I came across this site by accident. I’m very happy I did. What a huge resource of info here!
This story is a little lengthy, however, I need to tell you all the details so I can get some good feedback from you. Here goes.
I found a 3-story, 12 unit apartment building, with 2 commercial store fronts on the first floor. The building is vacant and needs a lot of work. The rehab project became a major headache for the current seller. It was seriously mismanaged. His loss, my gain.
I negotiated a $30,000 purchase price, even though he owes $75,000 on a mortgage. His bank agreed to take $45,000 and place it against one of his other properties so I can get clear title.
Terms are: 18 month land contract, $4000 down, payments are about $310 per month.
Here’s the great part. There is still $29,000 in grant money available on the property from the city. This never has to be paid back. So, it’s like I’m purchasing the property for $1000 net.
Originally, the seller got $69,000 from the city and used $40,000 so far. Needless to say the city is upset that the rehab isn’t near being finished and they paid out the $40,000 already. I met with them and they will not pay out the $29,000 until there is I’m $29,000 away from being completed.
The rehab will cost about $85,000. The appraised value “as is” is $60,000. “As rehabed” is $206,000. I will have about $120,000 net profit after rehab on the building! Not to mention a huge net rental income each month when all the units are rented.
I will have even more if I have the units converted to condos. It will only cost me an additional $4000 in legal fees to do this, however, it will yield a lot more than the $120,000 profit. It would probably take longer to sell the condos vs. renting the units out, however, I could charge a lot more for the condo units and sell them with creative financing.
This deal is too valuable overall to simply flip to another investor. Although it would be easily done. There is a problem though.
The seller had agreed to a one year energy weatherization stipulation (DIHR) when he purchased the property several years ago. This means, all pipes in the basement have to be wrapped, insulation in the walls, and two panes of glass, whether storm windows were added or thermopane windows were installed.
He didn’t meet this requirement within the first year. The state (DIHLR) put a block at the register of deeds office in Milwaukee county. This means that you can’t get conventional bank financing yet because the bank can’t record a mortgage on the property until the DIHLR is complied with.
There are 115 windows on the property. They were all removed and boarded up. The idea was to put in brand new energy efficient thermopane windows. Well, this is one of the main problems. It will cost about $20,000 to purchase and have these windows installed. Then the DIHLR stipulation can be removed and bank financing put in place for the remainder of the property.
- The insurance company won’t insure a vacant building.
This leaves vandalism and theft a huge concern.
- A serious cash outlay of $20,000 to put windows on and
then board over them to protect against vadalism from the
- It would actually be easier not to put the windows on
first. It will take up more labor costs to work around