Real estate horror story, need some advice

[David Li]

Hello everyone. So last year I bought a 7 units apt for 1.06 million dollars. Everything looks great on paper. Bought it with 3% seller financing on a 8% cap. What could go wrong right?

Only thing is I didn’t check with zoning and took the sellers word for it. It turned out that the house is zoned for single family. And other 6 units are build illegally now the city want us to tear down the whole thing, the entire lot!

Lesson learned is always verify all the info and make sure the building is zoned correctly!

My question for all you investor is that if I tear down the whole thing and try to building 8 townhouse on it whats the all in cost I’m looking at? And how much can I use finance? Or should I just stop paying the seller and let him foreclose on me so I will be only losing about 250k with my down payment?

[Account Closed]

Quote from @David Li:

Hello everyone. So last year I bought a 7 units apt for 1.06 million dollars. Everything looks great on paper. Bought it with 3% seller financing on a 8% cap. What could go wrong right?

Only thing is I didn’t check with zoning and took the sellers word for it. It turned out that the house is zoned for single family. And other 6 units are build illegally now the city want us to tear down the whole thing, the entire lot!

Lesson learned is always verify all the info and make sure the building is zoned correctly!

My question for all you investor is that if I tear down the whole thing and try to building 8 townhouse on it whats the all in cost I’m looking at? And how much can I use finance? Or should I just stop paying the seller and let him foreclose on me so I will be only losing about 250k with my down payment?

I, being a little more prone to taking the attack mode, would hire a real estate attorney and file a lawsuit for fraud, misrepresentation, unjust enrichment, wire fraud and I'd throw in contract violations for good measure. It's not a "little" issue and he either knew or should have known and should have declared that to you in the paperwork. He would settle the lawsuit for your $250,000 I'm betting.

That being said, I understand most people won't go that route, but it is available.