Our Current Purchase - Would Love Feedback!

[Mary Wilson]

Hi everyone!

We are currently putting an offer on a $183k property that is 2 floors, with each floor being 1200 sq ft.  The bottom floor is unfinished and not usable right now.  We want to convert this to a duplex with the top floor and bottom floor being separate units.  The city planning office doesn't see any reason the rezoning wouldn't be approved.  We ran the numbers with the rental property calculator assuming we were getting $2400 in rent ($1300 top floor, $1100 bottom floor based on rental analysis) and $75,000 in repairs and the cash flow was around $800 per month and the CCROI was 7% so all of the numbers worked out.

So, here are the issues we've found so far.  We had a contractor look at the property and it looks like the current owner was trying to make it into a duplex and made some changes with the plumbing and electric that were not permitted and from what he could tell not up to code.  We would need to split the utilities so that the units could be billed separately per zoning requirements.  All of this means permitting costs and costs to bring it up to code.  He also said a joyce between floors would need to be fixed as well.  These are the things he could see upon first inspection.

We plan to do all of the aesthetic work (painting, flooring, etc) ourselves but would need contractors to do the structural, electric and plumbing work.  

With this, we are planning on doing an investment loan but I question whether the financing would go through if things are not up to code on the house.  I think this has great long-term potential with a very painful short-term but being somewhat new to this would love to hear feedback on this good or bad as I want to make sure we make the right decisions with this one.  Thanks!