Owner Financing Available But What About Rehab Money?
I am looking at a 2 story building in a small town downtown area. The building was built in 1910 and is now vacant. It needs everything. I would like to make a loft apartment upstairs and rent out the downstairs for retail space. The owner will sell the building for $85,000 (tax records show he paid $70,000 in '98) and will do owner financing. 20% down at 7% for 10 years. Is that a good offer?
The problem is how do I fund the rehab? It will take about $40,000 to rehab. Are there low cost loans for rehabing old buildings? If so is that something that the state offers or the federal government? How do I find out about that?
Any other ideas about financing a project like this?
Zoi
Whats the property worth after repairs? What can you expect for rent?
I would begin this investment attempt, by asking the present time owner. He might be willing to do this in exchange for a small increase in the price of the building.
I must say I would like to hear your thinking as to just how you arrived at the purchase price and to what extent do you feel that the property will increase in value. Might not your conversion of the loft area into residential housing have a negative effect on the property?
In large cities such as New York, Chicago and genuflite Los Angeles ,it might have a very plus factor and with proper in fills of small businesses might just start a trendy dendy and then the values will really go up. I can see it now, a coffee shop with internet connections. Next door a gallery displaying very modern cubistic pictures reflecting on the life style of a local artist, who prior to this occasion was only famous for the amount of good grass he grew behind the barn. Then the final alcord, a restaurant specializing in the foods of the area. Flatend Grits crisped in an oiled chili sauce, quaffed down by a local wine or brew concocted by some ex navy type with a love of raisins.
Yes I am spoofing but hidden in this obnoxious BS is a kernel of truth. I hope you extract it and go on to glory.
Sounds like the ex bank building I am trying to obtain for much the same purpose at the corner of Weddington and Lankershim Blvd. in roaring cosmopolitean downtown North Hollywood. May the gods of finance and loft living smile down on both of us.
I do not know if this type of thinking is applicable to small towns. You might instruct us if you feel differently. I am sure we would all like to learn. Especialy me cause I am trying to do the same damned thing.
Awaiting Lucius
Lucius,
Thanks for the reply. I guess I need to tell you a little more to see if this makes sense. My son Adam is acutally the one who wants to buy the building. He's a 24 year old single fireman still living at home. He loves the loft idea. He wants his own place that will also be a good investment and generating some income would be a plus. He doesn't want just a typical house. Since his schedule includes 24 hour shifts he has a lot of time off to be able to rehab. My husband is a contractor so he could help when needed.
Now, does it make sense. You asked if loft space would devalue the building. Well in this area the building on the street that are 2 story have apartments upstairs. This little town is in the path of growth. Right now there are some vacant buildings but I think this will change. Rehabbed with new handicapped bathrooms, exposed brick walls, finnished plank floors, new HVAC, $800 to $1,000 per month is probably realistic at this time. If he were to get a room mate to share the loft that might bring in another $400 per month. We've been looking around for a while and we've never seen a commercial building this reasonable ( not counting metal buildings) So I don't know if this is a good move. With those projections for rent would it seem reasonable that the building would be worth approximately $150-$160,000? So far I've been talking to the local building inspector & zoning people to see what would be required. If I can figure out the financing then my next step would be to get an engineer to come look at the building and get his opinion. After that if it still looks good I would use the engineers opinion to do some price negotianting with the owner.
You said to maybe offer the owner more for the building for him to finance the rehab. Wouldn't that only work if he had extra cash around? Please explain that a little more. Do you know anything about downtown revitalization money or low cost loans? Of I'd just like to hear your opinion on this whole thing. We don't want to make a big mistake.