Quote from @Dan H.:
Quote from @Scott E.:
Your biggest challenges with finding anybody to lend you $50k on this deal are:
1. Based on your post, I doubt this church basement is zoned residential, and I don't get the impression that you are going through the re-zoning process.
2. You say you'll do all of the work. But I'm also going to guess you are not a licensed, bonded, and insured general contractor.
I could be wrong on my assumptions. But if the above 2 factors are true, you'd not going to find that $50k outside of using a credit card.
As to your number 2, most jurisdictions allow owner builder to do any and all work. This includes w9 employees of the owner. As owner, he does not need to be licensed, bonded, or insured.
That still leaves #1 as a potential issue. He states it is zoned R1 (single family) but wants a second residence. I have seen many churches were pastor’s home is on same lot Never seen the church converted to a second residential unit. This may not be permitted He will need to work with his jurisdiction on this and may be able to overcome this hurdle.
However, he also stated he needed the $50k for parts. In most jurisdictions what he describes will require permits and inspections. Residences should be safe. Converting basement to BRs can be costly due to ingress/egress issues. Permits and associated inspections have costs.
I suspect this project will cost significantly more than projected. At $1200 rent point and using the 50% rule would project $600/month cash flow. $50k at $600/month cash flow take 83 months to recover the financial investment (assuming OP can do it for $50k which I personally think is unlikely). This would not include the OP’s labor. I have made investments that have projected slow payoff from cash flow but they have always had good appreciation projected and/or a good value add. Not sure this effort has either.
Dan and everyone else - thank you for your input. Definitely very eye opening. The numbers just don't work. Which is a shame when you have a building but just can't do anything with it.
If the project were completed and I was looking for a tenant, that tenant would need to have an hourly income of $23 per hour in order to be able to afford to pay $1,200 per month rent (maximum rent one should pay is 30% of gross income).
There are many people not making $23 per hour and so prospective tenants are limited. Of those making $23 and higher per hour, would they really want to live in a church basement? No, I don't think so. Most would rather buy a home.
My end goal was to have some additional income in my modest retirement. In thinking about this I can go back to work and have steady income and a paycheck without all the headaches and the risks and sleepless nights.
Dan would you walk away from something like this or would you pursue it? What would you do with it? Spend some money on it and make it into a wedding venue? Or just walk away from it and count your blessings that you didn't get sucked into a money pit? Thanks again everyone I have really learned a lot from your input.
