203k loan for a BRRRR with a multi-unit.

[Joshua Vanderzanden]

Hey everyone, while looking for a deal I came across a property that is a 3 unit 9 bedroom 6 bathroom with a 3 car garage. There was a fire in the first floor unit and went all the way to the roof with a hole in it. The fire was in the back of the building. I still have not been able to go into the building, I was only able a walk around myself. While looking at the building, I was asking neighbors and found out from one that the fire happened from squatters in the kitchen.

They are asking 130,000...the next door building sold for 350,000. Which was the same building updated but they turned the dining room into an extra bedroom making all the units 4 bedroom 2 bathroom. Rent for them is 1600-1700 each.

Am I wasting my time with this? Should this be a great deal?

How long does it normally take for a rehab like this? 203k loan only allows 6 months for the work to get done.

Please help

[Noreen Eddy]

A couple of things to consider:

1. What kind of neighborhood has squatters and do you want to invest there?

2.  Was the dining turned bedroom done legally in this particular town?  Illegal bedrooms are probably not a good idea.  Also, what kind of renters will you attract without a dining room in the apartment, if you plan to go through with it?  

3.  203k loans include a NOTORIOUS amount of paperwork, and are often used on properties that would otherwise not be insurable.  6 months is not a long time, especially for the scope of damage you're describing - though yes, I believe extensions are possible as said above.  A lender will be the judge of what makes the property "safe" to their standards.  Keep in mind that a fire can cause structural damage (=$$ and time!).  

I agree with above - definitely get a contractor(s) to come with you when you get permission to assess the property from the inside.  I recommend using both a contractor and a lender familiar with the 203k process.  I personally would not buy this sight unseen.  

Best of luck!