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Updated almost 8 years ago on . Most recent reply
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Development Opportunity - Would Love Feedback
Hey guys! I am a newer BiggerPockets poster but I came across a potentially AWESOME deal that I wanted to share with you guys to see what you all think/if anybody has any experience and can help me out.
I was looking online and I found a house that is severely distressed in my city for $175,000 on a 0.45 acre lot. AS SOON as I saw this, my eyes got big! Single family homes here go for at least $400,000. I have never purchased a home so I reached out to a lender to see if I could get an FHA 203k loan. He let me know that I most definitely could and asked what I wanted to buy. I told him I wanted to buy this property, tear it down and build a small multi-family on it (duplex/triplex/fourplex). He said that he thinks the 203k would cover it but I should call the county and see what it is zoned.
I checked and the zoning will allow for me to build up to four units so my thought is that I want to ideally build two duplexes on the lot OR build a fourplex. I am hoping that the whole project would be around $650,000 - $700,000 ($170,000 for the initial purchase, $80,000 for the site prep work, $200,000 for each duplex OR $400,000 for the fourplex build). Mortgage would be about $3,300 and I think I could get at least $1,600 for each unit ($4,800 in gross rents - I would live in one unit) leaving me with a cashflow of $1,500 a month (before I set aside money for maintenance, possible property management, vacancy).
One thing that KIND OF worries me is that there aren't that many multifamily homes in the area so how will that affect my exit? In ten years, if I want to sell, will someone want to buy a duplex or a fourplex? Another thing I am thinking about is, will a 203k loan cover two duplex since I will TECHNICALLY only live in one of the building since they are detached?
I am trying to get in touch with some builders so I can get some sketches/designs for small multifamily buildings so I can get an estimate on the costs. Do any of you know any contacts nationally that build small multifamily homes? If so, I would REALLY appreciate it if you shot me a personal message with a link to their site so I can check them out.
What do you guys think about this? Is my logic flawed? I am new and would love, and appreciate, your feedback. Has anyone undertaken a project like this? Is it worth it?
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Just wanted to update anybody that happened to be following this thread (I see a lot of threads that start with someone doing something and they never really provide a conclusion after the build up lol).
So I partnered with a real estate agent and did some research on the property's history. We found out that there was seller paid cash for the property ($162,500) about five months ago. The seller had purchased several lots/houses in the suburbs of Portland and listed a few and was starting rehabbing a few.
I was preapproved for a 203K loan for $690,000 and I got a few rough estimates of $130-170 per square foot. My idea was to build a fourplex on it. The property had been on the market for several months so I wanted to make the seller a little bit of money while still leaving me enough money to demo the house and build a fourplex within my budget so I offered $170,000. ($690,000 - $170,000 = $520,000; $520,000/$140/sq ft = 3,714 square feet/ 4 units = 928 sq/ft per unit).
The seller's agent came back and said that the seller is deciding to take the property off the market and will take on the project him/herself.
I am kind of bummed, but at least I took some kind of action. I submitted my first offer and I am excited to find some more properties. I am going to try the direct mail route and hope that I can get some leads.