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REAL ESTATE Anybody ever own large old home converted to apartments?

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hakrjak

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I have the opportunity right now to buy 14 units at about $20k per unit, which is actually a giant old mansion downtown split up and remodeled into apartments. It's actually 2 buildings -- the mansion, and the cottage out back. Occupancy is currently only 40%, and the maint on the building looks to be severely neglected.

Is this a good opportunity to break into the commercial world, or is this a nightmare money pit waiting to happen? :)

Cheers,

- Hakrjak​
 

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Runum

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Hey hakrjak, I've got a smaller version of that. Large house, it was already divided into 3 units, I wanted to split one unit in half and make 4 total units. Bought it for $40k cash total so I was into it for, I hoped, $10k per unit. Should be worth $90/$100K fully finished and leased. We have rehabbed the 2 lower units and have them leased. Things I've learned:

City code would allow me to split the upper unit into 2 units BUT, I would have to have a sprinkler system installed.

Checked on sprinkler system. No problem, just tap into the existing system. Nope, called fire inspector or chief, has to be a completely parallel system from the main. This is water that can not be turned off at the meter. There were many other quirks about the sprinkler system and the more I asked the more expensive it was going to be.

Dealing with the city and permits is like hurry up and wait. Painfully slow.

So a 3 unit old house it is. I have done most of the rehab myself with help from my retired dad. We have major wiring problems due to partially updated wiring. I saw newer wire during a brief inspection and assumed it all had been updated. Wrong. We have some plumbing problems in that when something leaks upstairs it affects the lower unit also.

We had to rebuild many old windows due to rotting wood.

Overall it's all OK because I am doing the majority of the work. If I had a reasonably priced handyman to do some of the work it would probably be OK also. If I had to hire contractors to do everything I would have to count my pennies. When finished it will be a cash cow but it is tough work. Only about a month from being finished.

Have a good inspector take a long look at it. Check on zoning and city ordinances. Good luck.:cheers:

Greg
 

andviv

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kyjoe is your guy. Read his success story, I think this is exactly what he does.

Runum, very interesting situation.
Let me present you this in a different way, although I don't know if this is something you already considered:

How much would it be to do the whole work for splitting the units?
Make sure you are including the loss rent due to having the unit vacant.

Now, let's say that total cost is $25K
and the cost per unit in your area is $35K (that means how much you pay per 'unit' at today's market prices)

If that is true then it is still a great idea from the business perspective as you are buying another unit at a good discount.
Now the other question to ask yourself is, is the stress produced by this task worth the difference in price? (and remember that, by adding another 'unit' you are also increasing your net worth, not only the cash flow).
 

tbsells

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Jul 27, 2007
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The utilities can often be a problem in big old houses. Usually there is one water and sewer tap for the whole building and the landlord gets the bill. I have a couple old 2500 sq. ft. three families and it seems there is frequently a suprise on the water and sewer bills. A toilet that runs constantly can make a $100 or more difference quickly. I have looked into submetering but its not feasible in this case. I would be concerned about what I would be on the hook for with 14 units. It has also been my experience that I have had a harder time collecting rents in these units. Could be bad management on my part. Could be that your better quality tenants don't want to live in this type of building. I'm not sure. I'm sure it depends on the demographics of the area.
 
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hakrjak

hakrjak

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One of the problems I'm thinking of is that:

Yes... $20k is an amazing deal for per unit multifamily in my area, considering that most sell between $30-45k a unit... BUT....

An old house like this, probably with thin walls -- and tiny little units... I'm sure that the rents you can probably pull in are equally as respective to the situation the renter would be getting into.

I am doing some due dilligence this week and will post some followups....

- Hakrjak
 

Wolfgang5150

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I own one; a large mansion that is split into 8 units. It has appreciated well; the problem is what was pointed out above. The utilities that can not be metered seperately. It's difficult to police tenants leaving lights on, pluggin in electric portable heaters. when they pay one, or both of the utilities, the situation is much better.
Kevin S.
Orchard Park, NY
 

Bilgefisher

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Would sub-metering be something you guys consider before you sell to increase the overall worth of the property? In other words by lowering your total expenses how much can you expect the property to increase in value? Does that offset the cost to submeter? Sorry for 20 questions, but one more, on the average how much does it cost to submeter per unit?
 

andviv

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