Vacant 6 unit in a trust

[Renee Carter]

How realistic is the idea of a new investor partnering with a private money partner (debt investor) in order to gut rehab a 6 unit multifamily and get it occupied at 100% again and hold it for 5 yrs? I have read books and been on rehab projects. I actually have a good friend who is a general contractor and would do the rehab. I know how to evaluate a commercial property but I'm unfamiliar with the ALL acquisition costs. Is it realistic what I am trying to do?

[Jon Holdman]

Most private investors aren't looking to make a five year loan. They're usually shorter than that. And at fairly high rates, often too high to cash flow from a rental.

What you could do is to use the private lender to acquire and rehab the property and then refinance into a more conventional loan. Not really "conventional", because with six units you're looking at strictly commercial loans.

What experience do you have? If you're new to both rehabbing and lording, this seems like a big project to bite off. Is your friend experienced with commercial projects? With six units, building codes are different than for SFRs and inspectors can be very, very picky. A gut rehab is going to need permits and inspections. And you're probably looking at bring then entire building up to current codes. This sounds like an expensive rehab.

What are you putting in? Cash? Are you going to manage it?

You should find a lender to do the refi before you start the project. Find out what they will want to see. We did a refi on a mini-storage and the lender went back five years looking at income. Hopefully you can avoid that. But you're almost certainly going to have to have some history on the property before you can do the refi.