Need additional Funds to Complete Multifamily Rehab

Multi-Family and Apartment Investing
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Need additional Funds to Complete Multifamily Rehab

Matthew Masoud
Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes

So I purchased a deal off market on a 20-unit multi-family property.

Rents were $500-$600/unit whereas I rent them out Mid-Term for around $2,000/unit (market long term $900)

I only had the funds to close + turn/furnish 5 out of the 20 units (plus do lots of external repairs). I turned and furnished 5 units and got them rented at $2,000-$2,300, plus did most of the external building repairs (roofs, gutters, landscaping, ect)

Now I have 5 units at $2,000+ and 15 units at $550-$600. It's pretty frustrating trying to use cashflow to fix/furnish the remaining units.

I know I bit off more than I can chew but the deal was too good to pass up.

I've considered raising the rents on existing tenants but I'm concerned they leave and now I have a vacant unit that needs turns and furnishing without the funds to turn it.

How can I get the funds to finish stabilizing the property? Is this something a hard money lender would lend on? If so would I have to refi to pay back when the balloon payment is due?

I'd prefer not to but can I bring on additional investors to complete the renovation? But at what valuation? I've already done some stabilizing so the property is already worth more.

Interest rates are too high to refi one of my other properties that have equity.

For context, I purchased the property at $1.2m, total renovation costs are $200k (of which I spent $50k already) stabilized value is about $2m.

The property is currently cash-flowing decently but I'm saving all the cash-flow to turn the other units.

Thoughts?

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  • Doug SmithPro Member
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    3y

    Just clarifying, do you owe anything on the property? How much cash do you already have into it vs what you owe (if anything)? 

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  • Andy Finneran
    Real Estate Investor · Weehawken, NJ · Member since 2017 · 12 posts · 1 vote
    3y

    Can you do a Home Equity Line of Credit on any of your properties? Interest rates aren't great now but you can use your own equity to fund the repairs and pay off with the higher rents. As the property increases in value get it reappraised for a possible refinancing option.

    If you just need $10 - $15,000 for 18 months you can get a credit card with interest free for 18 months. You just have to charge everything in the first three months then pay the minimum till 17 months. Pay the whole thing off with a refi or other money and you got a free loan. 

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  • Matthew Masoud
    OP
    Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes
    3y
    Quote from @Doug Smith:

    Just clarifying, do you owe anything on the property? How much cash do you already have into it vs what you owe (if anything)? 


    Yes, we purchased the properties 70% LTV financing

    The property was purchased at $1.16m to be exact. $348k down. 

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    3y

    @Matthew Masoud

    some HM lenders offer rehab loans.  but not sure if they would want to do that on a property where they weren't in first position.

    maybe a business credit card?  i know from your other posts you have a pretty big portfolio.

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    3y

    @Matthew Masoud  if you can use a credit card to refurbish a couple of units maybe just raise the long term rent and take the chance some will leave. You would replace current revenue relatively quickly with fewer furnished units providing the furnished demand is what you anticipate. What kind of rehab are you doing in each unit?   Alot depends on what is the budget.  per unit rehab budget ?  furniture cost?   Can a credit card handle 2 units?  Otherwise talk to a hard money lender. 

    If you just go to $800/mo rent that is still $4000/mo more and where would they go if market is $900/mo. Alot depends on what kind of money is in the rehab costs.   

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  • Matthew Masoud
    OP
    Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes
    3y
    Quote from @Colleen F.:

    @Matthew Masoud  if you can use a credit card to refurbish a couple of units maybe just raise the long term rent and take the chance some will leave. You would replace current revenue relatively quickly with fewer furnished units providing the furnished demand is what you anticipate. What kind of rehab are you doing in each unit?   Alot depends on what is the budget.  per unit rehab budget ?  furniture cost?   Can a credit card handle 2 units?  Otherwise talk to a hard money lender. 

    If you just go to $800/mo rent that is still $4000/mo more and where would they go if market is $900/mo. Alot depends on what kind of money is in the rehab costs.   


     This is what I opted for.

    Raised rents to $750 and got approved for a credit card with a limit of $28k (15 months no interest) which could do 2-3 units, so if anyone leaves from the rents going up I can do the repairs.

    Win-Win. 

    For context, I'm spending $8k-$9k in unit turns and $2k-$3k in furnishing per unit

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