Ro, Ok, here’s where to start. Check the surrounding area for rents, vacancy factors and value. Once you know that the rents will support the cost of the building with room to spare, then talk to the city (zoning, planning, code enforcement and building department) about this particular building and see what they are going to require. If it’s boarded up, it may well be condemned and it will need to be “uncondemned” by the city. Only they will know what they require. You should be able to do this in one day. Also see if the city ownes it. Once you have this information, decide if you want to make an offer. If you do, make one based on your approval of all repair costs. Start real LOW! Ask for owner financing. minimal down with payments starting after repairs are compleated and building is occupied. If it’s owned by the city, see if they will just give it to you. Then find a good contractor and get a complete turn key bid including separate utility services for each unit. Turn the 3 BR owners unit into smaller units. You’re not going to live there, so you don’t need a 3BR unit in this mix. Maybe make two 2BR units and 9 singles. Once you have the full pakage price, recheck your figures and if they still give you a nice positive cash flow, then approach a lender. The builder may well be able to help you there. Most lenders will require some serious money as a deposit on a deal like this, so if you don’t have what they’re going to require, get a partner (maybe the contractor). Also check out the available city programs. They may give you low interest loans or even grants to do this project.
Good luck and keep us informed.
BillW.
Posted by Ro(OH) on February 28, 2001 at 23:38:39:
I’m a newbie, I recently came across a 10unit apt bldg that’s been vacant for 3yrs. It needs major repairs but the seller is only asking $20,000. It needs about $40,000 in repairs. I would like to rent it out section-8 when I am thru with repairs.
Where do I start? Do I have the city come out and give me specs on the property first? Have contractors come give me estimates first? It’s in an area where they are doing revitalization yearly, for the next five years.
It needs to be replumbed and I would like to set it up where the tenants pay there own utilities. Right now it is on one boiler and it was very expensive for the seller to maintain because of the one boiler.
9-1bdrms, an 1-3bdrm caretaker apt.
This will be my first deal and I want to know will banks loan on boarded up bldgs.?
I could use some very detailed advice. I have not made an offer on it yet, just wanted to do my homework first.
i think your estimate of repairs may be too low. $4K per unit is not “major repairs” unless your definition of major is a lot different from mine. $4K/unit gets you new paint, carpet, and probably some appliances. certainly not new plumbing; that could be $10k-$20k just by itself.
Ro, if this is your firsst deal, you might be biting off more than you can chew: not only major rehab, but city regs, permits, license and inspection compliance, Section 8 stuff, the list goes on. It’s pretty clear form your questions that you’re going to need a lot more detailed advice every step of the way. Why not try to flip this to an experienced investor, or get an experienced investor as a partner and hang around to watch how they do it? If you got all the numbers in order, you could stand to make some decent money yourself, without the ag and possible complications that could result.