Buying a Multi-Family, Inexperience Led to a Surprise.

[Jake Arnold]

So. I'm currently under agreement on an off market 5 unit. This is my second "going to close" deal.

    I've made offers on several properties and have been looking down all avenues for a deal. I finally found one. I walked the property after meeting the seller and was excited to see 3 turnkey, very nice units and 2 that needed work. 1 just needs to be rezoned and the other needs to be rehabbed (this was a 5 but lost its zoning).

    We agreed on a good price, especially with the potential of this property. I waved all contingencies besides the mortgage contingency. No earnest money. I did my own home inspection because I have been around building construction most of my life and currently do electrical work. 

    During due diligence I found that in order to make it a 5 unit again, I'd have to file multiple use variances and install automatic fire suppression ( sprinkler systems). This now becomes a much more costly and time consuming endeavor that likely is not worth the cost or time.

However, it still is profitable and offers a 14% CoC return semi conservatively. AS IS. Still, I do not feel as good about this deal and as we proceed I consider renegotiating or backing out. I'm also afraid that because of this market and the rate of inflation and rise of home prices I will miss this deal and it turned out being better than I thought.

I am under contract to but this within the next few weeks.

Anybody have any advice?