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July 23, 2008
Brownstone Shell question
Hello,
My husband and I are thinking about buying a brownstone shell in Harlem to renovate into a 2-3 family house. After reading some of the posts on this site, I've gotten the impression that mortgage companies don't give loans for buying and renovating brownstone shells. Is this true? Would this type of purchase require %100 cash for the property and renovations? What about FHA or 203K loans? Please advise. Thanks.
Comments
I don't know about now but Neil Ganic, the chef/owner of La Bouillabaisse and the new Annabelles in Red Hook, got a $250k bank loan to renovate a shell he bought on First Place off Court in the late 90s.
Posted by: Steve at July 23, 2008 3:26 PM
We wanted to buy a shell a yeat and half ago, but couldn't get financing. Our broker said that the house needs to be habitable. He said it should have a kitchen and bathroom, it can be in the worst condition, but as long as they were in working order.
And this was before the mortgage crisis.
Your best bet is to consult mortgage brokers and banks.
Posted by: bayridgegirl at July 23, 2008 3:36 PM
I know Community Preservation Corp is very active and will loan against the property including construction.
But it has to be non-owner occupied, investment property. They don't care what shape its in.
www.communityp.com
I have had dealings with them and found them to be very responsive & helpful.
Posted by: daveinbedstuy at July 23, 2008 3:46 PM
We found the situation to be the same as bayridgegirl. If you want to buy a shell, it is almost impossible to obtain a construction loan these days (you can't get a standard mortgage on a shell).
The only choice for us was to look at properties that were in bad shape, but inhabitable (meaning floors and ceilings in tact, kitchens, bathrooms, etc.). Even when the property is "inhabitable," in this market the problem is that the property won't upraise and your mortgage deal will fall through because of that. The best bet is to have cash for reno and enough cash for the actual purchase to cover any difference in the price and upraisal value. Estimates we received on gut reno in Harlem are in the 450-600K range, depending on the size of the brownstone.
Posted by: mkop at July 23, 2008 3:59 PM
I spent a lot of time researching this issue in the past 6 months in anticipation of buying a house in Harlem, and I would second what everyone has said above. You can't get a traditional mortgage, you will need a construction loan, which typically comes with a higher interest rate. (you also might want to look into wells fargo's renovation loan program, which combines a mortgage with a construction loan into one closing)
And you definitely cannot gut renovate a shell these days for less than $500K, and that is not doing anything fancy. Plus, be sure to educate yourself on the complicated zoning issues you will also encounter concerning SRO's and certificates of no harassment, etc, which can add to the costs, timeline & effort.
You might find, as we did, that it will be less expensive in the end to find a livable 'fixer-upper' rather than a shell.
Posted by: el_salar at July 23, 2008 4:55 PM
P.S. In general, we found that houses in Brooklyn were often less expensive and in better condition than in Harlem.
Posted by: el_salar at July 23, 2008 4:57 PM
Thanks for all your help. Especially, daveinbedstuy. I'll check out Community Preservation Corp. Also has anyone heard of or had any experience with Harlem Funding Corp?
Posted by: ggpack at July 23, 2008 5:36 PM
Especially in this economic environment, the logic behind the banks' position is this -- if you don't have enough money to buy a shell outright, you are not a great bet to deal with the likely million dollars and up to make it habitable.
No offence to you, but most folks would agree with them.
Posted by: ontheparkway at July 24, 2008 3:36 PM
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