SRO Vacant for at least 7 Years, FHA 203K Loan

Hi Brownstoners, I went to look at a property in Bed-Stuy today that has been vacant for at least 7 years. It is currently SRO restricted with no certificate of non-harassment in place. Since it has been vacant for so long, does anyone know the process we should follow if we were to make an offer? We would be using an FHA 203K loan so would need to start renovations right after closing, we can’t afford to wait for the powers that be to approve plans etc. based on investigations or the SRO CNO process. Additionally, this building is a wreck, needs a complete and total GUT. The roof has been leaking and there seems to be extensive water damage, mold, holes in floors, walls and ceilings, all new mechanicals required etc. The building is (3) stories plus an unfinished basement – it literally needs EVERYTHING. Is $270K in renovation costs a pipe dream? We’d be looking at turning this into a (2) Family, rental unit on the top, bottom (3) floors for us. Mid-grade appliances and finishes. Any insights, thoughts, guidance etc. is much appreciated. Thank you! Blue

blue1892

in General Discussion 11 years and 10 months ago

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blue1892 | 10 years and 10 months ago

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Hi, No I did not find a lender who would move forward on this scenario – In general SRO was the kiss of death for us as FHA buyers. We ended up finding a great 2 Family Brownstone in our price range and completely live-able condition with all the original details we love, so if you are at the beginning or even well into your search don’t give up! Everyone told us we were crazy regarding what we wanted, budgets, the market etc. etc. and the only thing that turned out to be crazy is the amazing house we found by digging daily through every conceivable listing service and walking around on the weekends for the price we are paying. 🙂 Good luck to you! Also I recommend Mike Goldberg at Powerhouse Solutions for Mortgage questions and in general amazing help throughout the house hunting, contract and closing process – could not have done this without him. Blue

anonymousmanhattan | 10 years and 10 months ago

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Blue, I am curious, were you able to find a lender that was willing to finance a SRO without a CONH? It sounds like this deal fell through, but I would be interested in getting the name of the lender. Thanks a million.

lawrenceken | 10 years and 10 months ago

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According to Prospect Mortgage, the advantage of FHA’s 203(k) is that the loan amount is based on the lower 110% of the projected market value following repairs or value of the property before rehabilitation plus renovation costs. However, only one loan might be approved for both home purchase and improvement.

bklyngirl | 11 years and 10 months ago

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Blue. I will say a prayer for you. You are going to need it. But if you have some sticktuitivness I am sure she will be a beauty. The only good thing about a straight gut is that everything you put in solves the old crappy problems but then you are limited by your budget. Unfortunately Bldgs (and god forbid) Landmarks are not the most expeditious agencies so your FHA sitch may pinch if you don’t get everything going asap. Good luck.

blue1892 | 11 years and 10 months ago

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Thanks again everyone, The search for the right property continues!

Augustiner | 11 years and 10 months ago

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You need to calculate 5-9 months for the Certificate. You might be able to file plans before, but demo will not start not earlier than 9 months from closing. Your budget should be at least double, if you have structural issues add 100.000. This is a massive undertaking, appliances and finishes are the last thing to worry about. If you are tight on cash, this project is not for you.

slopette | 11 years and 10 months ago

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One thing I learned from my recent (much more minor) renovation is that if you start off saying things like “we can’t afford… [this if things go haywire]”, you can’t afford it, period.

blue1892 | 11 years and 10 months ago

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Thanks everyone for the responses – I appreciate your feedback!

jcarch | 11 years and 10 months ago

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Cost wise, I agree with @curated…$270K is a pipe dream for the level of work you’re describing. If the house is a larger brownstone, 2x may not even be enough. jcarch ———————— James Cleary Architecture brownstoner.staging.wpengine.com/jamescleary

curated | 11 years and 10 months ago

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You will have to get plans and permits approved prior to starting the renovations. Since you plan on doing this with a 203k you will end up needing to get a 6 month extension from the bank to complete the work as it could easily take 2-3 months for you to get DOB approvals. The SRO issue will add even more time. We have many clients that have done gut renovations with 203k’s and if the project team (bank, contractor, architect, bank inspector) have worked together on 203k’s before you should have no issues. The biggest issue is budget. There is no way to do a full gut renovation of the home you have described for the budget you mentioned. You would probably need closer to double that amount. http://brownstoner.staging.wpengine.com/curated

SundialStudios | 11 years and 10 months ago

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The 203K process will require that you receive all permits before they will release any of the renovation funds, so you would be unable to begin renovations before obtaining all approvals. Good luck, Kyle Page AIA, LEED AP Sundial Studios Architecture & Design, PLLC