Financing "Unhabitable" Property
My husband and I want very much to buy a multifamily building in bad shape and gut it (he’s an architect). We’ve found several promising properties, but every mortgage broker I’ve spoken with has said that under no circumstances will a lender provide financing for a building that is “unhabitable.” And, if it’s livable but…
My husband and I want very much to buy a multifamily building in bad shape and gut it (he’s an architect). We’ve found several promising properties, but every mortgage broker I’ve spoken with has said that under no circumstances will a lender provide financing for a building that is “unhabitable.” And, if it’s livable but in terrible shape, the appraisal will likely come in way under the sale price. We’re looking in the $700K range, and are able to put down 20-25%, as well as financing the construction to the tune of $180-$200K. Our intention would then be to refinance. But it seems this makes us developers and no one’s giving money to them these days. If anyone has any advice or has dealt with lenders under similar circumstances, I would LOVE your help.
Hey ETBK,
we are just finishing with the loan process on a similar deal and as is mentioned above your best choice by far is Wells Fargo’s construction 203K program. From the #s you’ve stated this should be a relatively easy process. Call Aubrey Nurse @ 718 780 9105 and leave him a message if he’s not there (in fact was just in his office earlier today). Really busy guy but he knows these loans cold and will give you the best if not the only loan option around these days. Good luck and tell Aubrey Dr. T sent you.
They’ll fall further, mopar. NYC “Unemployment” [the reported one] is 10% and spiking. Interest rate hikes will add insult to prices already injured by the collapse of the unsustainable Ponzi/Madoff effect of “RE only goes up” (housing will be cheaper even at higher rates). Stop being a jerk. OP, listen to BHO. Even if I move to Detroit.
***Bid half off peak comps***
BHO, *hello,* these properties are already massively “delevereged.” They are multi-family Victorians going for less than $350,000. Stop being so kneejerk. OP, don’t listen to BHO. BHO, you can move to Detroit.
“If anyone has any advice or has dealt with lenders under similar circumstances, I would LOVE your help.”
Put plans on hold. Rent. Don’t fight the massive deleveraging. You will lose. Wait ’til the NY Case-Shiller YOY passes back up through zero. That’ll be your bottom.
***Bid half off peak comps***
You can directly to Wells Fargo, which does these kinds of loans, or find a mortgage broker who has experience with FHA construction loans.
The loans are more complicated, and they take longer to close (sometimes three months), but the brokers make more money on them.
This is absolutely no big deal as long as the ‘multifamily” is three or four units or less and you live in the property. You get an FHA 203K construction loan, which is wrapped into the mortgage.
You will pay slightly more than for a conventional mortgage (1 to 2 percent), and the FHA has to review the construction process and they disburse payments in three stages. You also have to pay some small fees for the oversight ($100 per period, I believe). You can read all about it on government web sites.
There are tons of houses like this in Bushwick and Bedstuy. The ones in Bushwick are $250,000 to $350,000 for a two-family. I saw a really cute one in a good location near the L but it closed a few weeks ago. You may have to outbid flippers buying with all cash.
These places are listed on the MLS. There are a few companies that seem to deal exclusively in them. One is Tom Marco Real Estate at (718)998-7100.
I have family members going after 203(k) purchase + construction loan for very little money (less than 400K). Th bank pre-approved the laon but is now finding all kind of ridicules reasons to stall and not close on the loan. 2 months into the pllication process, they were asked to write personal eassys on why they want to buy and live in the house (vs living in a cave I supoose or maybe they think homelessness is prefer for a family with small children). They also implied they would report them to the IRS if any discrepency is found on the application. The stress is mounting and so far the loan application is 3 months in the making with no end in sight.
The bank is M & T bank… avoid at all cost. Very unprefessional and probably using illegal tactics to avoid closing on the loan. A simple “Denied” would have been enough if they don’t want to extend the loan.
my two cents.
One of the way to do this is buy the house in cash and then take out a construction loan. You can apply for a 203(k) loan up to 6 months after closing.
Your best bet is an FHA 203k loan as stated above. This loan will absolutely let you buy a shell and renovate but it does have a limit and it has to be owner-occupied.
My post on this didn’t go through.
We did this back in the boom, financing beyond the purchase price so we could renovate. Hard then, harder now to find a lender who will do this and to know the right way to deal with appraisals. You will get a clear picture of what’s out there by talking to a few savvy mortgage brokers. I would call Adam Dahill (he’s a regular ehre), Norman Calvo of Universal, and Alan Trachtman of Trachtman and Boch. Between them you will get an informed picture of what, if anything, is out there.