Closed on first investment today!

[Caitlin Young]

Investment Info:

Small multi-family (2-4 units) other investment in New Orleans.

Purchase price: $525,000
Cash invested: $27,000

Purchased a 4-plex in the heart of New Orleans.

[Braden Smith]

@Caitlin Young Congrats on the purchase! 

I am both an investor and a licensed realtor in New Orleans. I have a couple of pointers for you...

The city instituted a 9 month moratorium on STR licenses while they conducted a study to develop new rules and regulations. During this moratorium they have not issued any new licenses, or renewed any that expired. I just spoke to someone on the City PLanning Commission about a week ago. The new STR rules are coming and they will enforce them. It looks like STRs will only be allowed with a homestead exemption in place, meaning the owner lives on the property. The STR rules for commercial zoned properties have yet to be decided. The city plans to enforce these new rules with a vengeance.

If you got 5% down on a multifamily, that means the lender thinks you live there. That could turn into an issue for you if you are not residing at the property. I would be careful about that.

I know the property you are referring to that is 175k. The owner/agent has been trying to sell that property for a long time. There is a reason he can't sell it... the property is zoned HMR-1. This is the Historic Marigny/Treme/Bywater Residential District. The HDLC (Historic Districts Landmarks Commission) has full control here. This means every single detail has to go through them. If you have never dealt with the HDLC before, I can tell you from experience that they are a pain to deal with, to put it lightly. Even very experienced investors and contractors have a hard time dealing with the HDLC. 

I can also guarantee you that there is no way you can rehab that property for 250k given its condition and size, not to mention the fact that it would have to be rehabbed in a historically accurate manner. For example, you would have to put in real wood windows that are 3-4 times the cost of vinyl windows. I just sold a property off of Carrollton uptown that we did a full gut renovation on and our cost was close to $90-95/sf. That would put the rehab for this property in the vicinity of 500k. Typically a full gut renovation runs about $75-85/sf at cost, with no contractor markup. Just the wiring alone would run about 25-30k for this one. Interior paint would be another 20k. The place is huge so the costs will add up very quickly. And for 4 units you have 4 kitchens, 4 or more bathrooms, etc. 

As far as using the property for a multifamily goes... how many electrical meters are present? Are there any there? Entergy pulls the meters after the power has been off for 6 months. If the meters have been pulled (I would think so since this property has been sitting empty for a long time), you are unlikely to get approval to have that many meters again. Most of Orleans Parish has a moratorium in place for larger multifamily properties, unless the property is specifically zoned for that. This was part of the new CZO (Comprehensive Zoning Ordinance). I would suggest you check with the city on this.

Commercial loans typically require 20% or more down. I use commercial loans in my business frequently. I have never seen one that will do 10% down.

Just keep in mind, that if that property was such a good deal why hasn't anyone scooped it up? The MLS listing shows the days on market at 226 days as of today...

Hope that info helps. If you have any questions, feel free to reach out.