Save or sell? Lemon in quickly gentrifying area

[Juan Escarcega]

Hi all,

Long story short, (see previous post for long story) I bought a giant headache as my first property and am waaayyy over budget, but good ol’ LA real estate has amazingly enough exceeded my deficit. I still have another leg of the project to go and am running out of time/cash but the equity keeps going up. It’s located in South Los Angeles just a few blocks south of the USC coliseum. I bought about couple years ago and the area just keeps getting better and better.

Ideally I’d like to rent it out, cash out refinance, pay off my debts to keep it as an income property then potentially build units in the future (9-10 allowable), but I can sell right now for a small profit and a good learning experience.

Are you ready for the problem? It’s an illegally converted (vacant) TRIPLEX=>DUPLEX in an RSO rent control area with no certificate of occupancy and likely some parking issues, still in need of some electrical mechanical permitting. I’ve gotten through the housing department and am currently doing a major cosmetic remodel to capitalize on equity, but am foreseeing problems in the refinance. Here are my 2 main concerns.

1) My credit is in bad shape after weathering the storm and had to drop to a part time job in the process, so I look pretty weak on paper. I talked to some lenders and would be able to refinance with hard money, but that might be cutting my spread a little too thin, especially since I can’t legally rent it yet and am still a bit of a rookie.

2) Being that it's my first property and there are still some lingering issues, I'm wondering if taking on a financial partner to help turnkey and finish the BRRRR process would be worth it. Because I'm so over budget and I'd have to pay off my current loans first, I'm not sure if the offer would be attractive enough. I've also never formally structured a partnership before so any recommendations on that would be great.

I’ve kind of boiled it down to taking on a financial partner or selling at a very modest profit unless by some miracle the building and safety inspection goes off without a hitch. Looking forward to hearing your thoughts!