We Renovated a Rundown 1920's Church

[Benjamin Riehle]

Right in the heart of downtown Tucson, a church, along with other properties had been long forgotten. The package was listed at 550K. Along with the church (shown above), the listing included 2 houses and 3 vacant lots.

We locked up the property under contract at 550k. We brought in an engineer to address some structural issues. The issues were determined to be fixable and due to some professional negotiation, the purchase price was decreased by $225,000 for new purchase price of $325,000.

THE NUMBERS:

The total cost of renovation for this product was $710,000, bringing the “all in budget” to $1,035,000.

The home below was remodeled for $120,000 and then sold for $283,000 immediately after renovations.

The second house was remodeled for $40,000, and is currently rented for $1,200/month. This home was recently appraised at $260,000.

The church renovation added up to a total of $550,000.

The church was divided up into a 4-unit complex. It is currently bringing in a total monthly rental income of $5,800 a month. The church was large enough to divide it up to 6 units but when you move into the commercial space (5+ units), the lending side becomes difficult to re-finance under a valuation of $1,000,000. We wanted to have the opportunity to pull our cash out so that's why we stayed at a total of four units. 

Unit layout: 2 Studio lofts, 1 two-bedroom loft, and 1 office space loft that is currently occupied by a property management company.

Two of the three lots were sold for $80,000 and the third is currently being used as storage for the company.

Recap of the numbers are below:

Purchase and Remodel: ($1,035,000)
Flipped house: $283,000
Two Lots sold: $80,000 (40,000 each)
Total rental income: $363,300
Purchase price after sales: $671,000
Net Rent income per year: $56,000

Cap Rate: 8.35%

Watch the remodel of the church: https://www.youtube.com/watch?v=JMpYtQ_z_xA