Develop or leave as cash flow?

[Robert Fonner]

Hello, 

My wife and I own a property in Arlington Texas. A block away from the cowboys stadium. Property currently has a residential building that we run our business out of, is a STR for the events, and sell parking also for the events.

I am interested in redeveloping the property to be a fourplex. Have a developer working on designs at the moment to see if even possible with city codes. Current estimates are around a million. 

Curious about the wisdom of messing up a good thing with a cash flowing property to potentially own/sell a multi million dollar property.

obviously would like  a better understanding of the risks involved.

Thank you 

[Shanequa J.]

Will you make more money with the 4plex than what you're profiting now?

Are there other residential properties in the neighborhood?

Can you stomach going over budget, time delays, and having to pay the mortgage without any income coming in from the property?

[Bruce Lynn]

Quote from @Robert Fonner:

Hello, 

Do you have the cash to build it, or are you going to need to borrow the funds?

My guess is at current interest rates and building costs, the numbers won't make sense.

Are you in the STR zone I guess? Could all 4 units on the 4plex be STR?

Also one thing to calculate is the lost income during tear down and construction and leaseup.   Are you busy all year round with the current business or is there a down time where you don't have occupancy and parking and could do it then?

[Robert Fonner]

Quote from @Shanequa J.:

Will you make more money with the 4plex than what you're profiting now?

Are there other residential properties in the neighborhood?

Can you stomach going over budget, time delays, and having to pay the mortgage without any income coming in from the property?

Hello and thank you for responding/helping me to get a better idea of moving forward.

So, Yes, I would likely be able to move my main business to a rental location and preserve most of my income. We also have another office location that would not be affected. I would be giving up the parking business but that would be negligible. There are other residential in the neighborhood so zoning i don't think would be an issue. 

We would need to borrow to get the project going. We are in the STR Zone, and the goal (if possible) is to get the project complete before 2026 Fifa world cup. do STR for 2026 and start long term renters after. With occupancy rates, utilities and bills the math works out that long term rentals are going to be more manageable. The parking and STR are all mostly seasonal (cowboys season).

I have had a GC working with the city to see if the project is even possible. He has come back after talking to an architect (who happens to be on city council) and let me know that a set of 4-5 townhomes would be possible. He says that he has done all the work that he can without starting to spend some money. Has quoted a price between 1.5 -2.2 million. He wants around 50k to get everything started. 

I am unfamiliar with taking on a loan of this size and the possible liabilities. 

I'm  curios about the disaster scenarios and what to look out for.  

I'm also curious about creative ways to finance the project as its hard for me to imagine a bank loaning me this amount of money.

Thank you for any input and questions. 

Thankful to have a resource like this to learn from my community.