Virus wiped out sober living home plans. Really bummed about that. Plus I now have an unfinished house I can hardly even rent out with carrying costs of $1940/mo.

What made you interested in investing in this type of deal?

Giving back and something different. Bread and butter rentals can get boring.

How did you find this deal and how did you negotiate it?

A friend in the sober community owned this and FB messaged me. We knew the house was worth $300-$320k as-is. We started there and deducted sales commissions he wouldn't have to pay of $22k plus a good guy discount plus fast sale by 12/31 for his tax situation. He planned to sell 2 other houses in 2020.

How did you finance this deal?

Private money. A seller from 2005 owner-financed us on a 7-plex. Over the years they sold us additional property and offered to lend.
I draft all docs and usually self-close if a refi, but went through a title co on this purchase. The way they scooted my own finance docs over to me to sign like they were contaminated was comical.

How did you add value to the deal?

1500sqft of this house was under-utilized. It was a daycare so it had a huge 19×17 play room and half of the finished basement was a nursery school. We added 4 rooms and a half bath. Officially we turned a 3/2 into a 6/3 plus hobby room. A 7th bedroom would require a variance from the city.

What was the outcome?

The virus held up permitting and squashed our plans of having strangers room together in a sober living environment. I was also done playing with it. I lease optioned it to a contractor investor friend. 24 month term with escalating price. 12 months for $310k, 13-18 months @ $314k, 19-24 months @$318k. Option consideration of $1500+ sweat equity. $1850/mo. My nut is $1940, so -$90/mo cf plus $51 000 invested and 2 months of work sunk. Woo-hoo!

Lessons learned? Challenges?

Glad I didn't use hard money. If I didn't have a longer-term true private money loan from someone I know I WOULD BE SCREWED.
Short deadline risk of HMLs is not discussed enough on BP.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Local Architect and BP friend @Nik Moushon inspected the house with me and provided excellent advice about codes and how they would apply as I attempted to change the use and bed count of the house. Thank you, Nik👍