Making the numbers work!

[Anthony Simboli]

All,

My business partner and I are ready to make our first investment but have a few questions as we wait for our offer to be approved. 

At the highest level we are buying a 3 family house where we will occupy 1 unit and rent out the remaining two units. Based on our anticipated offer being approved our numbers will work for us where we are comfortable, however, there are a few outstanding expenses that we foresee (prior to our legitimate inspection). They are, lead paint removal, and replacing the 3 furnace units as they are original and are on their last life. This is a great property that we would love to invest in but would like to get some understanding on how we can 1.) afford these capital expenditures early on and 2.) what we could expect to pay for those expenses. When we redo the furnace units we will likely incorporate central A/C as well. 

The house is 2950 Sq. Ft.

Any strategies on how to "afford" these expenses early on?

Any help would be greatly appreciated.

Thanks for your time.

[Robert P.]

If you are planning on living in the unit, you can do an FHA 203k rehab loan where you can "roll" the rehab costs into the mortgage.

The pros: 

-3.5% down. (get seller to pay the closing costs and you can get a decent house pretty cheap)

The cons: 

-you will have to pay PMI for life of the loan

- contractors that do the work need to have all proper paperwork, and lead cert if doing lead work (these guys can be a lot more expensive)

- 3.5% is based on total project cost, not just the price you pay for the home. (i.e buy a home for 200k and put in 60k, you pay 3.5% of the 260k.

good luck! I am in the process of doing this now, so I can answer any questions you may have about it.