Pros and cons of flipping a building

[Daniel Lozowy]

One very common strategy in my market is to take a distressed building, throw all the tenants out and flip it to the max. We're talking high-quality renovations to reach the top of the market rents. For example you take a semi vacant 14 unit built in the 1940s and turn in into premium units. You finance it with hard money and then try to re-fi as soon as possible. 

Besides the obvious risks, what are the pros and cons of such a strategy?

[Greg Dickerson]

Originally posted by @Daniel Lozowy:

One very common strategy in my market is to take a distressed building, throw all the tenants out and flip it to the max. We're talking high-quality renovations to reach the top of the market rents. For example you take a semi vacant 14 unit built in the 1940s and turn in into premium units. You finance it with hard money and then try to re-fi as soon as possible. 

Besides the obvious risks, what are the pros and cons of such a strategy?

These type of deals generally have the highest return potential. The key is to know the market and what will bring the highest return on investment. You need to know what to do to the property. You don’t want to over improve or under improve. 

As for “throwing tenants out“ this is not a Viable option or even legal. You must honor the lease. The way to do renovations is to either not renew leases and renovate as units turn or renovate with tenant in place if they are willing to renew at the new rates.