23 unit apartment built in 1908 gut out and renovation cost?

Question

Looking at purchasing a 23 unit apartment complex that was originally built in 1908 for 125k. The building was originally a high-end residential apartment. The interior has been demoed except for the interior walls and everything has been cleared out and the building sits empty. The building looks very pleasing from the outside and the only thing im really purchasing is the skeleton and frame of an apartment complex.

The question im trying to get at here is what kind of ball park figure cost would I be looking at if I were to have the interior professionally gutted and renovated? Im talking new plumbing, electrical, appliances, everything to make it tenant move in ready.

Any and all input is welcome, just trying to figure out if its worth the financial hole I would be digging for myself before the building can be rented.

Alan Brown · Answer

Sounds pretty exciting to me!  if it's in Missoula you've got awesome rental capability at any size;  I do agree that 2 bed 2 baths are my faves, though I'm not scared of mixes with studios and 1 beds thrown in...

I think the point is rehab costs, though, isn't it?  I don't know what your financial capabilities are, but this sounds like a good opportunity to consider partners, especially folks in the trades.  I would get it under contract, and get real bids from every trade. Be extremely detailed on your Scope of Work. Major due diligence, but you'll know a lot more when you're done!!  maybe enough to bail, or maybe enough to give em your best offer and be ready to walk away.  I would also pad your total rehab estimate by at least 20%, just because.

Account Closed · Answer

What is the need for low income senior housing?  There is often government money to subsidize refurbishing the old hotels/buildings to provide low income senior housing.

I now live in these types of buildings and I can tell you from where I sit, that with more and more baby boomers retiring, there is a growing need for these units.  And the great thing, is you can legally only rent to 55+ or 62+, depending.  Renting to the older tenant means less turnover and no kids.

And I disagree that smaller units are undesirable.  I managed a 26 unit building that had been built in 1906 and converted to apartments during WWII in Silicon Valley, and most of them were tiny studios.

The great thing about renting out smaller units, is you have less tenants - and less kids.  Hey, I love kids, but they cause damage and noise.  Renting to a single tenant or a couple, or maybe a couple with one kid (which would most likely be your max with 1 bedrooms) is great.  Plus, you have less need for parking spaces.

Anyway, I did some Googling and here's who you need to talk to about the possibility of getting some funding to turn the place into low income senior housing:

http://housing.mt.gov/MFDevelopment

And they use USDA loans for renovations and mortgages, etc., apparently:

http://www.rd.usda.gov/programs-services/multi-fam...

It's big business with the growing need.  And my experience in two of these renovated buildings (both old hotels) has been good, overall, as a tenant.

And I can tell you that there are normally long waiting lists to get into them, too.  And they're normally attractive.  In other words, you would not be bringing the "ghetto" to the neighborhood.  You can still be very picky about your tenants.  I actually had to pass a background and credit check just to get on a waiting list for one of these places, and pay the application fee.  And, when I get to the top of the list, I'll have to have that all done again and pay the fee again.  So, you can be picky with your criteria, even for your Section 8 tenants.

For what it's worth.  Best of luck to you.

Anthony Wienke · Answer

So $40 to $200 is a pretty good generalized price for most renovations? Egh... This 125k property is quickly turning into a 650k apartment with no immediate income once its done. That's not even accounting for the months and months of renovation time with money going out and nothing coming in.

I Don't think this property will qualify for a 203(k) or Fannie Mae home style renovation mortgage. I believe there are some business loans that would cover the renovations costs but I may have to either rally some more investors or look for a smaller property.

Thank you everyone for the great input, once the darn contractors get back to me about fixing price ill have a better idea of financials.

Patrick McGowen · Answer

I am no expert by any means, but I have used $100-200 per s.f. just a back of the napkin to see if it even pencils out.  You should get contractor estimates for as much as you can before closing.  I found J. Scott's book on estimating rehab costs very helpful.

http://get.biggerpockets.com/flippingbook/

Good luck!

Anthony Wienke · Answer

That's the magic number I was looking for all this time George! I think 15k would be a good estimate for how costly each unit would be to fix up the apartment to rentable status.

I would get a better idea of exact cost if the contracting companies I contacted would get back to me but so far no luck. I guess its a little difficult to estimate until they get working on the property.

What type of loans are out there that would support fix up costs for an apartment? Or would the lender need to have an appraiser go through to guestimate how much the loan should be to have the property up and running?

Thanks!

Carl, depending how the property runs I may not let go of my share. On the other hand If the building is fixed up and all the investors decide to sell you would be looking at a 1.1M dollar purchase. But if you have the funds and a lender to cover it you might be the right candidate to help us let go of the building once its renovated!

George P. · Answer

I'd love to get something like that...  but expect 15k per unit to fix it.

Carl Neff · Answer

You'll have no issues with rents there.

Let me know if you want to get rid of it.

Anthony Wienke · Answer

You will have to humor me, I don't know many of the acronyms the people on this forum use (GC specifically).

I do have another interested partner that wants to pitch in money wise for a % of the NOI based on his contribution in either the initial percentage down payment or refurbishment cost. Or we could sell the property after one year IF the apartment shows successful rental history.

That's still being worked out but no one will have more control over the investment property more than the other. We would need a majority vote for major decisions without quarrelling from the smaller loosing party. Everything will be split 50/50 in terms of how many contributors there are to this project, with that said we would need to agree to a set contribution amount so no one is getting cute short or given more.

All of this I just said is just a suggestion and what I foresee as a possible outcome. Depending how many investors there are involved, a lawyer specializing in real estate and some other professionals may be needed.

To answer your financing question, nothing has been finalized and no lender has been contacted. I personally have my own finances ready to go but im more than willing to have additional capital and some helping hands with the project.

ok, if your still reading this I think im done ranting. Now what does GC stand for? lol You can PM me

23 unit apartment built in 1908 gut out and renovation cost?

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