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Updated almost 14 years ago on . Most recent reply

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John Roberts
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Need Some Good Ideas From

John Roberts
Posted

Hello,

I was presented with a problem recently and am stuck in finding a solution.

A friend of mine was given control an appartmet complex by his father last year and he does not know what to do with it. He has no experience in real estate and does not necessarily want to be a landlord.

The complex is in a low income area with no turn around in site. After he paid a management company to come in and asses the property it turns out it needs about 300k in renovations to make make it livable. Further the basis on the house is 3.2 million and the debt left to repay is 3.8m.

So my question is what should he do? After some research I can up with the following ideas: cleaning it up and fill it with sec 8 tenants, stabilize the rent role and sell off the property. Based on the 2011 HUD FMR schedule he could get an above market rent paid directly by the government. Or, possibly selling the property and doing a 1031 to defer the taxes or doing a short sale.

As you can tell I am fairly new to RE myself so I am looking for some quality ideas from experienced pros.

I may have left out some vital info because of my ignorance on the subject. I can provide more as needed.

Any help would be appreciated. Thank you.

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Kevin Yeats
  • Lender
  • Fort Pierce, FL
486
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825
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Kevin Yeats
  • Lender
  • Fort Pierce, FL
Replied

John,

My first reaction would be to examine the "needed" renovations list carefully. Which items are absolutely necessary to make another unit habitable (plumbing, electrical, or HVAC problem), which items would make an "OK" unit more attractive (replace appliances) and which items are purely cosmetic (extra landscaping)? Which items are needed to a common area more useable (repairs to swimming pool)?

What are the costs with each repair? Can management rent the units immediately after repairs ... that is, is there demand for the units?

Above all, what are your friend's goals?

I have more suggestions but would prefer to continue this offline. Email in my signature

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