Funding my future home.
I’m curious to see what this community thinks of an idea I’ve been throwing around. Purchase a multi unit brownstone. Gut and renovate into modern, highly attractive units. Live in one of the units myself than rent out the others to cover the monthly costs associated with the loan and maintenance costs of the building. Assuming continued occupancy I can pay down the loan and as my family grows, knock down walls and expand my apartment eventually turning the brownstone into a single family home. On the business side, I would setup a LLC that actually owns the building, taking the loan through the company and therefore limiting my personal liability.
jason
in Brownstoner Renovation 11 years and 11 months ago
15
Please log in, in order to post replies!
15 replies
resident2 | 11 years and 10 months ago
Apart from the “Gut Rehab” part this is exactly what generations of Brownstners have been doing for decades; Brownstones are very flexible that way. Doing it as an LLC will add to yours costs of financing and loosing the owner occupancy income tax deductions.
fcdrzlqniytyvj | 11 years and 10 months ago
Jason, This is a great idea while not totally unheard of. The deference between making it work and failing is the research you do into the project. The more you learn about the financing, building codes, and insurance requirements the less do over work you will do and also the less down time you will have figuring out what to do while mortgage payments are adding up. Planning should take at least as long as actual construction and you want construction to take no more than 6 months before you rent the place out. Your intuition that good design overcomes all is correct. Part of good design is knowing all the non variables ( codes, etc..) before you get into the variables. ( your design and ideas). It’s not a get rich quick scheme you are proposing but a great idea that you will need to spend a lot of your efforts on to find reward. Best of luck!! Ian
deano | 11 years and 11 months ago
In your shoes, i’d look for a 2-family configured as a 3+1 with an extension, such that you can get a 2-bedroom garden apt (and also shared yard access from the parlor). Renovate that the way you want and start off living in the garden apt collecting rent for the triplex above. when you need more space, just switch places, and eventually use the garden apt as your guest suite or teenagers’ lodge. You could also do similar with a 2+1+1 if you dont need so much space.
Augustiner | 11 years and 11 months ago
It is very expensive to change the c of o around, so generally i would avoid that. I’d rather do the 1 family c of o and rent out undercover. This will work for a 2-3 story with garden rental. No matter what size or configuration, If you want to eventually use the majority of the house for your family, my layout recommendation is to occupy the the top floors first, and expand down. In multifamilily townhouses 1/3 of the usable sqf is lost to the common hallway. If you integrate that into your living area you win a lot of space, and you have more possibilities.
rh | 11 years and 11 months ago
If you think of it as a way to offset your costs and not as a business, living in a multi family home is absolutely the way to go. Granted, I tend to purchase in neighborhoods before the prices get out of control, but my rentals pretty much do take care of my mortgages. I always look at the size of the rental units as well as the location. In other words, don’t pay more for a “renovated” 3 story house over the 4 story that needs some work. You can make a double duplex and have plenty of space for yourself while getting a premium for your rental. Another thing that I’ve personally had success with getting more for my rentals is doing non-generic renovations. I agree with Brokelin on keeping the home intact without gutting it. Modern renovations can start to look dated after awhile. With some creativity, you can make it look fabulous without too much money. Plan ahead if you know you’re going to be switching it up. Think of how the NEXT set up will be and plan the current one so it’s not a big change. If your kitchen and bath materials are only a few years old and in good condition, you can resell them. No need to put them in a dumpster!! Lastly, have you considered going the AirBnB route? Not sure of the legalities of this but it might be something to think about.
Townie | 11 years and 11 months ago
Depending on the location renters are more than satisfied with a clean and functioning apartment slightly below market rent. Skip the “modern highly attractive finishes”. You will save the cost and future waste of undoing everything later. I have never had a vacancy in 20 years following that method. When I sell I expect the next owner to gut everything down to the brick anyway which is now the reality in the South Slope.
xchx | 11 years and 11 months ago
Unless you’re putting a ton of money down, the rent from the units you are renting out will not cover your mortgage. You’ll be lucky to find a situation where your net cost for your apartment is equal to its rental value. Do some math with mortgage calculators. That said, I don’t think it’s a bad idea, I just would keep your eventual use in mind when you’re doing the renovations and don’t waste any money renovating things you’re going to re-do.
brokelin | 11 years and 11 months ago
Yeah, jcarch, that was my suggestion exactly, only I’m not an architect, just someone who knows doing a renovation and then doing one over again is not cost effective. And having a renovated multifamily home with high rents can throw off enough income eventually to fund a home renovation.
jcarch | 11 years and 11 months ago
@jason…in the end the question is whether the inefficiencies inherent in the concept make it too expensive to do. @brucef raises a good point too. You’ll be building at least 2 “nice” kitchens that you’ll be throwing in the dumpster in a few years if things go according to plan. Possibly the same for at least 1 bathroom. Between these items, the filings, the added costs altering spaces that you’ve already paid to renovate, my guess is that you’re easily going to spend over $100K-$150K more to do this in steps rather than setting the building up as a single family now. That’s a steep price to pay. And the peeling away of layers is a great idea, but I think you’ll find that you can’t align the layouts for a multi-family and a single family as well as you’re thinking. My guess is that you’ll want to adjust about 50% of the interior layouts as you transition from one to the other. I think it would make more sense to buy the building, do minor renovations to improve the rents, and move into one floor. Stay like that until you have the $ to take over the whole house, and then do one major renovation. You’ll reduce your costs across the board and will simplify the whole process. jcarch ———————— James Cleary Architecture brownstoner.staging.wpengine.com/jamescleary
jason | 11 years and 11 months ago
@jcarch, You’re exactly right, if I could afford to purchase and renovate out right, a building I would be happy with for the next 30 years I would do so. This process hopefully allows me to end up in the house of my dreams and will reward hard work over time. I’d like your’s and the communities thoughts on the process; Start with a master plan, the eventual layout of the single family home. Put in the groundwork for this and then add ‘layers’ on top to create the individual units. Due this knowing the order in which you’ll expand, and when the time comes you simply peel away the layers and apply the finishings needed for each room.
jason | 11 years and 11 months ago
brucef, I actually posted here in hopes that members of this community would be able to poke holes in the idea. While yes, a nice kitchen is expensive, through good design you can overcome the costs and create something that is attractive and relatively affordable. I think my next step may be contacting an architect to get a more educated estimate of what the total cost of the project may be, in a building similar to what I’m looking for. Then modify those plans to accommodate the actual structure I decide to purchase.
brucef | 11 years and 11 months ago
I suspect, given the location of your query, and the fact of human nature, that you are seeking affirmation rather than a bucket of cold water. The numbers don’t work, not even close. The cleverness and convenience is wishful thinking. Example- Highly attractive units each have an expensive room, the nexus of many expensive systems. This room is called a kitchen. One hopes to make back the investment over time. If you add that unit to the unit you are living in (as you … expand), you now have an expensive room that needs to be gutted, and converted to a more useful function. Time to come up with a different plan.
brokelin | 11 years and 11 months ago
Alternate option: Don’t gut and make modern, just restore and keep the details…that’s what people like best in brownstone apartments, not the gutted and soulless interiors. Live in one, if you like living with your tenants. If you don’t, rent that unit out and buy or rent an apartment elsewhere. Move to a larger rented or owned apartment elsewhere if your family outgrows your place. When you have lots of dough and decide to spend it in rehabbing your brownstone for fewer families, kick out some tenants and renovate … but you won’t have to be living there while renovating (again), a big plus. You might decide to do this last step, or you might decide to keep the rental income and buy and renovate a different house for you.
jcarch | 11 years and 11 months ago
“Knock down walls & expand my apartment.” That sounds great, but the each phase of this work will likely need to be separately filed, with corresponding DOB fees, architectural or expediting costs, etc. That may just be the cost of doing business in this scenario, but you may end up spending 10’s of thousands of extra dollars compared to doing it all in one step, so be sure to budget for those costs. And at some point, you’ll be changing the C of O for the building, as you change use group from an R-2 (three or more units) use to an R-3 (one or two family). At that point, you’ll have to sprinkler the entire building. So you’ll be ripping up all those nice apartment renovations you did when you first purchased the building, and then patching everything, to get the sprinklers in. I guess the question would be – if it costs you an extra $50K over a decade for multiple filings, sprinkler related work, etc. when compared with just buying and renovating now, is it still worth it. My guess is that the answer is probably ‘yes,’ especially if this is the only way to afford the size building you want. Good luck. jcarch ———————— James Cleary Architecture brownstoner.staging.wpengine.com/jamescleary
mousta | 11 years and 11 months ago
I do this now. 2 family though. Don’t underestimate what it means to be a landlord while living in the same home as your tenants. There are positives and negatives. And of course you’ll need to work on getting a loan. Not all banks will consider rental income when coming to a decision especially if you have no history of being a landlord and the building isn’t currently running a decent rent roll. Also make sure to keep a healthy contingency budget. A year and a half in and I’m still finding things that need to be done.