Want To Buy An Old Property That Needs Everything. Tell Me I'm Not Crazy
April 8, 2016 10:11 AM Subscribe
We are very interested in purchasing a small commercial building from the 1920s to renovate into our home. It is brick with high 14' ceilings and it is really cool- like a mini loft. It has been used as residential before, but is currently basically a really nifty shell. It is empty of basically everything and needs a lot of work done. Does this make financial sense? Read on, please.
I am dying to buy this piece of property, but I wanted to get some opinions. It is a very unusual building in our area and would be extremely cool after renovations. Basically it would be our dream home and barring some unusual circumstance, we could see living there for a long time.
I don't detect any cracking in the walls. As a commercial structure it seems remarkably solidly built. In the interior, there is little left. There is a concrete floor. I haven't had it inspected or appraised yet. Supposing it is a very good shell without foundation problems, I am looking to do a 203k renovation loan.
One of the issues is that the area is transitional. It is about 4 blocks from a nice area where houses sell from about 150k-200k. However, those are mainly brick houses, and surrounding our house are older frame houses from the 1920-1930s. These have sold for maybe 50-85k. There was a 1000sq ft 2 bed 1 bath frame house from the 1920s a couple blocks away (closer to but still outside the nice area) that sold for $96K after renovation.
This property has 1700 sq ft plus a basement area of about 6oo sq ft. With a 203k loan, you can borrow up to 95% of the after repair appraised value which is based on how much a home is worth after repairs. This house needs to have the roofing replaced above the concrete on the flat roof, it needs plumbing replaced, bathroom fixtures, electrical put in, kitchen put in, HVAC, gas line for the kitchen repaired or replaced, interior insulation, and drywall. It would need most of the windows and window frames replaced. These windows are taller than regular windows, but there are not necessarily more of them than you would expect in a house this size.
It would need to meet FHA minimum standards after renovations. http://portal (dot)hud(dot)gov/hudportal/HUD?src=/program_offices/housing/ramh/mps/mhsmpsp
We would be happy if it just barely met mimimum standards as we could complete further improvements using a renovation contractor we know, although we would like better than basic, energy efficient windows. We are content with a rougher, loft like interior.
What do you think the maximum appraisal of final value ( after renovation) could end up being based on the surrounding houses, the area, the sq footage, the uniqueness of the building. We would have to be able to accommodate the purchase price of the building and the cost of the renovation under this final after repairs appraisal limit, because the bank would not lend us any more.
We would be willing to put some of our own money into the deal above and beyond what we were able to get a loan for, but not tons. If we need to sell in 3 years for some reason, we don't want to have lost a lot of money on it. In a 203k loan, you can put some money in escrow to pay for things beyond what the bank is willing to loan.
We have good credit, save a fast clip, both make a decent living. We are on the frugal side and would love to have the house of our dreams for no more than $160k or so. Is this an impossible dream? We don't live an area with moderate construction costs.
What would you pay the seller for a property like this?
I am dying to buy this piece of property, but I wanted to get some opinions. It is a very unusual building in our area and would be extremely cool after renovations. Basically it would be our dream home and barring some unusual circumstance, we could see living there for a long time.
I don't detect any cracking in the walls. As a commercial structure it seems remarkably solidly built. In the interior, there is little left. There is a concrete floor. I haven't had it inspected or appraised yet. Supposing it is a very good shell without foundation problems, I am looking to do a 203k renovation loan.
One of the issues is that the area is transitional. It is about 4 blocks from a nice area where houses sell from about 150k-200k. However, those are mainly brick houses, and surrounding our house are older frame houses from the 1920-1930s. These have sold for maybe 50-85k. There was a 1000sq ft 2 bed 1 bath frame house from the 1920s a couple blocks away (closer to but still outside the nice area) that sold for $96K after renovation.
This property has 1700 sq ft plus a basement area of about 6oo sq ft. With a 203k loan, you can borrow up to 95% of the after repair appraised value which is based on how much a home is worth after repairs. This house needs to have the roofing replaced above the concrete on the flat roof, it needs plumbing replaced, bathroom fixtures, electrical put in, kitchen put in, HVAC, gas line for the kitchen repaired or replaced, interior insulation, and drywall. It would need most of the windows and window frames replaced. These windows are taller than regular windows, but there are not necessarily more of them than you would expect in a house this size.
It would need to meet FHA minimum standards after renovations. http://portal (dot)hud(dot)gov/hudportal/HUD?src=/program_offices/housing/ramh/mps/mhsmpsp
We would be happy if it just barely met mimimum standards as we could complete further improvements using a renovation contractor we know, although we would like better than basic, energy efficient windows. We are content with a rougher, loft like interior.
What do you think the maximum appraisal of final value ( after renovation) could end up being based on the surrounding houses, the area, the sq footage, the uniqueness of the building. We would have to be able to accommodate the purchase price of the building and the cost of the renovation under this final after repairs appraisal limit, because the bank would not lend us any more.
We would be willing to put some of our own money into the deal above and beyond what we were able to get a loan for, but not tons. If we need to sell in 3 years for some reason, we don't want to have lost a lot of money on it. In a 203k loan, you can put some money in escrow to pay for things beyond what the bank is willing to loan.
We have good credit, save a fast clip, both make a decent living. We are on the frugal side and would love to have the house of our dreams for no more than $160k or so. Is this an impossible dream? We don't live an area with moderate construction costs.
What would you pay the seller for a property like this?
not directly answering any of your questions, but without an inspection in hand, how can you know the state of the building with regard to previous-use industrial waste? was it, for example, an automotive garage and maintenance facility or a light-industrial manufacturing facility? If either of these are past uses, it would be in your best interests as potential property owners and inhabitants to be pretty clear about toxicity risks and mitigation requirements you may be facing.
You do note it was in previous use as a residence. Did the prior inhabitants or landlords do toxic materials due diligence and mitigation if needed? If you can't find anyone who can state definitively that this was performed, you should assume that it has not been and that you will need to take that into account.
I mean, you don't *have* to. But ignoring it or excluding it from your due diligence won't make whatever may be there go away.
posted by mwhybark at 10:24 AM on April 8, 2016 [8 favorites]
You do note it was in previous use as a residence. Did the prior inhabitants or landlords do toxic materials due diligence and mitigation if needed? If you can't find anyone who can state definitively that this was performed, you should assume that it has not been and that you will need to take that into account.
I mean, you don't *have* to. But ignoring it or excluding it from your due diligence won't make whatever may be there go away.
posted by mwhybark at 10:24 AM on April 8, 2016 [8 favorites]
I think one of the main challenges you will have is re-sale value. If you want it to be your forever home, by all means, buy and make it into what you want it to be. But if you have any inkling that that you may need to move and sell it, you will need to face the fact that there are a lot less buyers who are willing to think outside the box in terms of blending in with the neighborhood, plus paying double+ what the going rate for neighboring (ie, competing) properties would go for.
Is there any land associated with this building? Something that would make it outstanding for families or people who like to throw a lot of parties? Any other features (existing or that you could reasonably and inexpensively add) that would draw potential buyers to pay a premium for this property relative to its competition?
Say you had to move but did not want to sell the property. What are rents in your area? How easily could it be rented? What is the likelihood that your property could command a rent that would be high enough to cover your mortgage, plus additional expenses? If all of the rentals in your area are around $1K/mo and your mortgage plus expenses will be $2K/mo, you're going to have a tough time.
I tend to be risk averse, particularly when it comes to money. So that's my bias. Unless I knew *for sure* without a doubt that this would be my forever home, or if I possibly had money to burn if I had to walk away from it for some reason, I would give this idea a pass. Lovely to daydream about, but could cause heartache down the road.
posted by vignettist at 10:25 AM on April 8, 2016 [2 favorites]
Is there any land associated with this building? Something that would make it outstanding for families or people who like to throw a lot of parties? Any other features (existing or that you could reasonably and inexpensively add) that would draw potential buyers to pay a premium for this property relative to its competition?
Say you had to move but did not want to sell the property. What are rents in your area? How easily could it be rented? What is the likelihood that your property could command a rent that would be high enough to cover your mortgage, plus additional expenses? If all of the rentals in your area are around $1K/mo and your mortgage plus expenses will be $2K/mo, you're going to have a tough time.
I tend to be risk averse, particularly when it comes to money. So that's my bias. Unless I knew *for sure* without a doubt that this would be my forever home, or if I possibly had money to burn if I had to walk away from it for some reason, I would give this idea a pass. Lovely to daydream about, but could cause heartache down the road.
posted by vignettist at 10:25 AM on April 8, 2016 [2 favorites]
Oh yeah, the inspection should include putting a camera down the sewer pipes and a structural assessment. You'll pay a bit for each, but you'll NEVER regret it.
posted by Ruthless Bunny at 10:25 AM on April 8, 2016 [7 favorites]
posted by Ruthless Bunny at 10:25 AM on April 8, 2016 [7 favorites]
I think the main question is how much it would cost you to fully renovate the building. Assuming the zoning is not a problem, the structure is solid, and you aren't dealing with any contamination issues, you can certainly turn a empty shell into a house. The issue is cost.
As you say you live somewhere that doesn't have moderate construction costs (and even if construction costs were low), I really doubt you can do roofing, flooring, plumbing, kitchen, bathroom, insulation, HVAC, gas, insulation, windows, and drywall for less than $100/square foot. Maybe if you did all the work yourself, but hiring contractors? No way. So, I suspect that even if you could buy the property for a negligible amount, you aren't going to be able to finish the whole thing for $160k.
You say you can buy a renovated house in this area for less than $100/square foot. It sounds like you live in an area where house values are well under construction cost (I'm guessing not a lot of new construction is going on). You are going to do a lot better buying a house, in that case, rather than buying a building that needs 75% of the work still done on it to become a house.
If this is labour of love and you want to do tons of work yourself, sure. But if this is a practical way to get a house (which you might even sell in a few years), then I'd look elsewhere.
Step one if you want to move forward is to get a general contractor in there to give you a very rough estimate of the cost to do what you want to do.
posted by ssg at 10:30 AM on April 8, 2016 [2 favorites]
As you say you live somewhere that doesn't have moderate construction costs (and even if construction costs were low), I really doubt you can do roofing, flooring, plumbing, kitchen, bathroom, insulation, HVAC, gas, insulation, windows, and drywall for less than $100/square foot. Maybe if you did all the work yourself, but hiring contractors? No way. So, I suspect that even if you could buy the property for a negligible amount, you aren't going to be able to finish the whole thing for $160k.
You say you can buy a renovated house in this area for less than $100/square foot. It sounds like you live in an area where house values are well under construction cost (I'm guessing not a lot of new construction is going on). You are going to do a lot better buying a house, in that case, rather than buying a building that needs 75% of the work still done on it to become a house.
If this is labour of love and you want to do tons of work yourself, sure. But if this is a practical way to get a house (which you might even sell in a few years), then I'd look elsewhere.
Step one if you want to move forward is to get a general contractor in there to give you a very rough estimate of the cost to do what you want to do.
posted by ssg at 10:30 AM on April 8, 2016 [2 favorites]
Here is a list of helpful inspections:
Chimney Inspection
Electrical Inspection
Home Inspection
HVAC Inspection
Pest Inspection
Pool and Spa Inspection
Radon Inspection
Roof Inspection
Septic Inspection
Structural (Mechanical) Inspection
Water Test
Well Inspection
posted by lstanley at 10:32 AM on April 8, 2016 [2 favorites]
Chimney Inspection
Electrical Inspection
Home Inspection
HVAC Inspection
Pest Inspection
Pool and Spa Inspection
Radon Inspection
Roof Inspection
Septic Inspection
Structural (Mechanical) Inspection
Water Test
Well Inspection
posted by lstanley at 10:32 AM on April 8, 2016 [2 favorites]
I live in a loft in a former industrial building in downtown LA. (We rent.) Before we moved in, we had an inspection because my husband is fussy. Even though the building had been used as a living space for about 5 years before, there was so much work to make it habitable.
Does it have central heating? If not, are you willing to pay for that? We live in a mild climate and use space heaters, but it's still chilly in January.
If it's brick--how's the mortar? Ours was very dried out, and chunks were falling weekly--exposed brick looks nifty, but drywall can hide a multitude of sins.
If you have not done a lot of home renovation before, you might want to do some research first. Same with living in an industrial space/zone--there's a lot that residents of residential neighborhoods take for granted.
posted by Ideefixe at 10:39 AM on April 8, 2016 [2 favorites]
Does it have central heating? If not, are you willing to pay for that? We live in a mild climate and use space heaters, but it's still chilly in January.
If it's brick--how's the mortar? Ours was very dried out, and chunks were falling weekly--exposed brick looks nifty, but drywall can hide a multitude of sins.
If you have not done a lot of home renovation before, you might want to do some research first. Same with living in an industrial space/zone--there's a lot that residents of residential neighborhoods take for granted.
posted by Ideefixe at 10:39 AM on April 8, 2016 [2 favorites]
I'm with ssg - I don't think you're looking at the right information in trying to discern a price. Those comps you mention are not really comparable. This building is not a brick house 4 blocks away in the nice neighborhood; it is also not a wooden frame house in the transitional neighborhood. It is basically a concrete box in the transitional neighborhood. This could well impair your resale value; urban lofts are a love-it-or-hate-it thing and for instance a family of 3 would get a lot more value out of a multi-room house with that same square footage than they would out of a roughly-finished loft.
Get it inspected, have a long talk with your contractor friend to figure out what it's going to cost to bring it up to your standards, and then if that amount is even below $160K to begin with, whatever's left over is what you can offer the seller. I do think you will have some trouble getting it to appraise at $160 given the comps - although the contractor might have some ideas about this and may have encountered similar situations before.
posted by Joey Buttafoucault at 10:39 AM on April 8, 2016 [5 favorites]
Get it inspected, have a long talk with your contractor friend to figure out what it's going to cost to bring it up to your standards, and then if that amount is even below $160K to begin with, whatever's left over is what you can offer the seller. I do think you will have some trouble getting it to appraise at $160 given the comps - although the contractor might have some ideas about this and may have encountered similar situations before.
posted by Joey Buttafoucault at 10:39 AM on April 8, 2016 [5 favorites]
If we need to sell in 3 years for some reason, we don't want to have lost a lot of money on it.
Your whole post is about how much money you want to sink into this place to make it your dream home, but then there's this sentence that says you want to be able to jump ship in three years with little loss of funds. I don't think these two plans are compatible. A costly labor of love for your forever home includes you living there forever. (Or, at least longer than 3 years for any kind of ROI.)
I think this is a nice dream, but it is still a dream.
posted by jillithd at 10:54 AM on April 8, 2016 [15 favorites]
Your whole post is about how much money you want to sink into this place to make it your dream home, but then there's this sentence that says you want to be able to jump ship in three years with little loss of funds. I don't think these two plans are compatible. A costly labor of love for your forever home includes you living there forever. (Or, at least longer than 3 years for any kind of ROI.)
I think this is a nice dream, but it is still a dream.
posted by jillithd at 10:54 AM on April 8, 2016 [15 favorites]
If you're willing to spend $160k, why wouldn't you just buy the nice brick home in the nice neighborhood 4 blocks away?
posted by crazy with stars at 11:07 AM on April 8, 2016 [1 favorite]
posted by crazy with stars at 11:07 AM on April 8, 2016 [1 favorite]
We started looking into 203k (before finding our wish list bingo card already done) and I strongly recommend talking to a 203k consultant or a general contractor who really knows the process before doing anything else.
posted by supercres at 11:34 AM on April 8, 2016 [1 favorite]
posted by supercres at 11:34 AM on April 8, 2016 [1 favorite]
Everyone else has given you great answers. I'm someone who bought a fixer (a giant barn and a little serviceable house attached) with the idea that I would live there maybe forever and a few other things. It didn't work out for me like that (but was ultimately fine) and there were a few major reasons. I still look at weird rando places for sale up here. Here are some lifestyle considerations you may want to think about in addition to the other things.
1. IMMEDIATE neighbors - you don't mention this but are your neighbors commercial or residential buildings? The concern in a transitional neighborhood is extremely good or extremely bad neighbors. Give a good long think to how that might affect things like noise and parking and light pollution if you care about that.
2. LIFESTYLE - I like to travel. Buying a fixer wasn't good for that because there was a lot of work on the place that needed doing which needed to be done by me OR someone I oversaw. Going away when a place is "in process" raises the likelihood of you being away when something goes wrong. Plus, I just didn't spend my spare time messing with the place. I'd go hiking, I'd see friends, I'd bake. You need to think about whether you want your hobby for the next few years to be this thing. You may! But if you're someone who likes to loaf and slack this may not be the project for you. Be honest about the type of people you are right now. Does your dream involve you changing into different sorts of people? I'd be skeptical about that dream.
3. WHAT NOW - would you need to move into this place now and live there while it was getting renovated? That is a headache which some people don't mind and many people do. Get some good time estimates as well as $$ estimates from the people who might be doing this work.
4. RISK - you seem less than clear about how much you are "all in" on this idea. Nothing wrong with that but there's a huge difference between a forever home and a place you might have to sell in a few years if you are talking about this sort of thing. FSBO websites are full of nicely renovated "quirky" places that people couldn't wind up living in for various reasons. They sell cheaply. Have a realistic assessment of what you can risk and how that balances with the other things you care about. Esepcially think about whether you guys might have a family because that can change your view of places like this real quick.
I have a cousin who just did this sort of thing in Kentucky. It became basically his whole life for a decently long time. It's amazing and I think for him worth it. Feel free to click through some of these links and drop him a note if you are in that sort of area of the country.
posted by jessamyn at 11:44 AM on April 8, 2016 [7 favorites]
1. IMMEDIATE neighbors - you don't mention this but are your neighbors commercial or residential buildings? The concern in a transitional neighborhood is extremely good or extremely bad neighbors. Give a good long think to how that might affect things like noise and parking and light pollution if you care about that.
2. LIFESTYLE - I like to travel. Buying a fixer wasn't good for that because there was a lot of work on the place that needed doing which needed to be done by me OR someone I oversaw. Going away when a place is "in process" raises the likelihood of you being away when something goes wrong. Plus, I just didn't spend my spare time messing with the place. I'd go hiking, I'd see friends, I'd bake. You need to think about whether you want your hobby for the next few years to be this thing. You may! But if you're someone who likes to loaf and slack this may not be the project for you. Be honest about the type of people you are right now. Does your dream involve you changing into different sorts of people? I'd be skeptical about that dream.
3. WHAT NOW - would you need to move into this place now and live there while it was getting renovated? That is a headache which some people don't mind and many people do. Get some good time estimates as well as $$ estimates from the people who might be doing this work.
4. RISK - you seem less than clear about how much you are "all in" on this idea. Nothing wrong with that but there's a huge difference between a forever home and a place you might have to sell in a few years if you are talking about this sort of thing. FSBO websites are full of nicely renovated "quirky" places that people couldn't wind up living in for various reasons. They sell cheaply. Have a realistic assessment of what you can risk and how that balances with the other things you care about. Esepcially think about whether you guys might have a family because that can change your view of places like this real quick.
I have a cousin who just did this sort of thing in Kentucky. It became basically his whole life for a decently long time. It's amazing and I think for him worth it. Feel free to click through some of these links and drop him a note if you are in that sort of area of the country.
posted by jessamyn at 11:44 AM on April 8, 2016 [7 favorites]
Wait, so you're looking to take out a renovation loan that costs more than basically any residential house in the neighborhood? On top of the cost of actually buying the place, of course.
The only way this makes any kind of sense to me is if you are going to live in this place for the rest of your life. Otherwise couldn't you have just bought basically the absolute nicest residential property in the area, move-in ready, and still saved money?
I love gritty urban spaces and industrial conversions and lofts and crazy renovation projects, but unless it is the only home that would ever do in your opinion, and you just can't see yourself living in a house like normals, I kinda don't get it. Especially if there's a scenario where you could sell in 3 years. I mean, would this place even be livable a year from now?
posted by Sara C. at 11:55 AM on April 8, 2016 [1 favorite]
The only way this makes any kind of sense to me is if you are going to live in this place for the rest of your life. Otherwise couldn't you have just bought basically the absolute nicest residential property in the area, move-in ready, and still saved money?
I love gritty urban spaces and industrial conversions and lofts and crazy renovation projects, but unless it is the only home that would ever do in your opinion, and you just can't see yourself living in a house like normals, I kinda don't get it. Especially if there's a scenario where you could sell in 3 years. I mean, would this place even be livable a year from now?
posted by Sara C. at 11:55 AM on April 8, 2016 [1 favorite]
Is the building zoned for residential? I'm assuming it is, but double check. Are neighboring buildings commercial or residential? This will affect resale if it's residential surrounded by commercial. When it was commercial what was it used for? I'd want to be sure the property wasn't contaminated by industrial use. I think remodels work best if you can do much of the work yourself (and do it well) and if you get the property for very cheap. Yes, get an inspection from an inspector of your choice, not your agent's. You should be able to get the listing agent's permission to meet at the property with some contractors to get bids. Get at least 3 contractor bids and add 20% to their estimate. And finally, I'm not sure where you live, but an urban loft sounds like a challenge to heat. I live in Wisconsin and I'd be pretty worried about insulating and adding heat to a commercial warehouse space. So that's a lot of negative feedback, but if you can make the numbers work and you're sure about the location, then why not?
posted by areaperson at 12:21 PM on April 8, 2016 [1 favorite]
posted by areaperson at 12:21 PM on April 8, 2016 [1 favorite]
Another contaminant to inspect for is lead paint, especially in buildings formerly used as factories or other commercial purposes - dealing with lead paint remediation is hugely expensive and complicated. And absolutely required if you have or plan to have children.
posted by john_snow at 12:36 PM on April 8, 2016 [3 favorites]
posted by john_snow at 12:36 PM on April 8, 2016 [3 favorites]
but without an inspection in hand, how can you know the state of the building with regard to previous-use industrial waste? was it, for example, an automotive garage and maintenance facility or a light-industrial manufacturing facility?
Note that an inspection typically will include the items on lstanley's list above, and not necessarily the prior uses of the property - however you may be able to research this via your city public records office. Subsurface testing for contaminated soils typically requires coring at a variety of locations as determined by the geotech inspector and can get expensive quickly.
Having just dealt with a similar (but much larger scope) situation at work - Unless you have reason to believe this particular property was compromised in the past, and you plan to extensively disturb the existing site utilities or the soil (eg to install a basement), you're probably better off skipping the contaminated soils testing unless it's a precondition of your financing or grant approval.
posted by a halcyon day at 12:38 PM on April 8, 2016
Note that an inspection typically will include the items on lstanley's list above, and not necessarily the prior uses of the property - however you may be able to research this via your city public records office. Subsurface testing for contaminated soils typically requires coring at a variety of locations as determined by the geotech inspector and can get expensive quickly.
Having just dealt with a similar (but much larger scope) situation at work - Unless you have reason to believe this particular property was compromised in the past, and you plan to extensively disturb the existing site utilities or the soil (eg to install a basement), you're probably better off skipping the contaminated soils testing unless it's a precondition of your financing or grant approval.
posted by a halcyon day at 12:38 PM on April 8, 2016
Note however that site and building utilities installed between the 30s and 70s (roughly) in some regions were often asbestos transite, as were some building panels/siding used in commercial construction. Transite can become friable if disturbed and then requires specialized remediation. You'll want to specifically inspect for these items.
posted by a halcyon day at 12:43 PM on April 8, 2016
posted by a halcyon day at 12:43 PM on April 8, 2016
Agreed with commenters above that you need to look into the history and any potential regulatory listings before you buy this. You do not want to be on the hook for removing an underground storage tank or installing a vapor mitigation system. If it's something like a former drycleaner or auto garage, there's also a potential for health risks to you living there. (On preview, let me add that these health risks exist even if you do not disturb the soil. A wide variety of hazardous materials, including chlorinated solvents, mercury, and benzene, may be able to intrude from soil, groundwater, and/or soil gas into the indoor air in your living space to create a health hazard.)
Appraisers and building inspectors and structural engineers do not have the experience to comment on environmental risks. You should still get comments from them on their own areas of expertise, of course. But be aware that they generally don't know much or anything about the environmental side.
Lead-based paint, asbestos, and/or PCBs-in-building-materials abatement are also potentially pricey at this kind of structure, and are a separate area of concern from impacts to soil/groundwater/soil gas. Note also that you can find issues with things like lead-based paint regardless of prior site use -- lead-based paint was as likely to be used at a neighborhood bakery as at an auto repair shop.
I will also note that financing and refinancing former commercial property with residential loans can be complicated. A lot of banks don't really have expertise in working with these types of properties.
posted by pie ninja at 12:55 PM on April 8, 2016 [3 favorites]
Appraisers and building inspectors and structural engineers do not have the experience to comment on environmental risks. You should still get comments from them on their own areas of expertise, of course. But be aware that they generally don't know much or anything about the environmental side.
Lead-based paint, asbestos, and/or PCBs-in-building-materials abatement are also potentially pricey at this kind of structure, and are a separate area of concern from impacts to soil/groundwater/soil gas. Note also that you can find issues with things like lead-based paint regardless of prior site use -- lead-based paint was as likely to be used at a neighborhood bakery as at an auto repair shop.
I will also note that financing and refinancing former commercial property with residential loans can be complicated. A lot of banks don't really have expertise in working with these types of properties.
posted by pie ninja at 12:55 PM on April 8, 2016 [3 favorites]
I've redone a bunch of houses and designed and built two singlehandedly from scratch, and what I'd add is this:
Would you really enjoy the process and get a lot of satisfaction from the final result? I've found that in most financial decisions, I've had to factor in this emotional element. It counts. For what it's worth, I made money on every one. (The amount of emotional satisfaction varied considerably.)
posted by Skipjack at 1:53 PM on April 8, 2016 [2 favorites]
Would you really enjoy the process and get a lot of satisfaction from the final result? I've found that in most financial decisions, I've had to factor in this emotional element. It counts. For what it's worth, I made money on every one. (The amount of emotional satisfaction varied considerably.)
posted by Skipjack at 1:53 PM on April 8, 2016 [2 favorites]
Does this make financial sense?
Probably not. And the fact that you are posting an AskMe to ask if it does means you are probably not the people who could make it make sense.
There are folks who do this sort of thing and have experience and a good eye or gut or whatever for it and can go SHABOOM! I did this THING and LOOKIT and it works. And they generally aren't going to explain their crazy assed sounding idea to a bunch of internet strangers and ask if it makes sense because they know that most folks don't know enough about their secret sauce to say "Oh, yeah, I totally get where you are coming from!" And it sounds like you have no secret sauce.
That doesn't mean you can't do this. But you probably need to do a LOT more research and prepwork before diving in and if you haven't done renovation work before and don't know that much about real estate and want to do it anyway as your dream home and a labor of love, expect for the financial piece to probably be painful and stressful and leave other people shaking their head and going WHY?!
The real estate market these days is a lot more flakey than it used to be. It is no place for noobs to take big risks and hope it works out financially. If the financial piece matters -- and it sounds like it does -- this is probably a bad idea. If you remain enamored with the idea, you really need to knuckle down and do serious research, a lot lot more than posting a question on Ask Me.
posted by Michele in California at 3:05 PM on April 8, 2016 [2 favorites]
Probably not. And the fact that you are posting an AskMe to ask if it does means you are probably not the people who could make it make sense.
There are folks who do this sort of thing and have experience and a good eye or gut or whatever for it and can go SHABOOM! I did this THING and LOOKIT and it works. And they generally aren't going to explain their crazy assed sounding idea to a bunch of internet strangers and ask if it makes sense because they know that most folks don't know enough about their secret sauce to say "Oh, yeah, I totally get where you are coming from!" And it sounds like you have no secret sauce.
That doesn't mean you can't do this. But you probably need to do a LOT more research and prepwork before diving in and if you haven't done renovation work before and don't know that much about real estate and want to do it anyway as your dream home and a labor of love, expect for the financial piece to probably be painful and stressful and leave other people shaking their head and going WHY?!
The real estate market these days is a lot more flakey than it used to be. It is no place for noobs to take big risks and hope it works out financially. If the financial piece matters -- and it sounds like it does -- this is probably a bad idea. If you remain enamored with the idea, you really need to knuckle down and do serious research, a lot lot more than posting a question on Ask Me.
posted by Michele in California at 3:05 PM on April 8, 2016 [2 favorites]
I personally would walk about. However, I'm conservative when it comes to renovating old properties.
posted by GiveUpNed at 10:29 PM on April 9, 2016
posted by GiveUpNed at 10:29 PM on April 9, 2016
I renovated a house that needed everything using a 203k loan. You can peruse my question and comment history to get a sense of the challenges I ran into. The first contractor I picked turned out to be a bad choice (to say the least), and the cost of repairs far exceeded the initial plan. My version of this project, originally intended to be a quick four months, turned out to take up all of three to four years, delaying efforts in my professional and personal life (like starting a family).
What happened to me is unlikely to happen to you, but my story is an indication of how tough this path could turn out to be. You're considering a project that could turn out to be fairly massive and that has some big risks, as many people above are pointing out. Here is my own comment about risk.
Even if everything goes as planned, this is a big project, so you'll end up pouring in a good amount of your lifeblood. I think a project like that is more likely to be worth it if it was going to be your "forever" home. If it's a place you might want to leave in three years, it might be better to pick a less intensive project.
By the way, it's good you have cash reserves. The 203k financing requires you to front a fair bit of the money and not get the final 10% until the entire project is done. I found that process to be a bit of a hassle.
Anyway, on to the question you asked! I don't think it's very easy to answer. I would guess that the "brick warehouse conversion" market is pretty bifurcated. Is there even market demand for upscale hip industrial chic lofts in your city? Do you have the design skills (or budget for a designer) and the budget for finishes that would appeal to that market segment? I'd look to similar properties nearby for comps. If this would be the first project of its kind in that neighborhood, then you'll be taking on the risk of proving whether a market exists for this property in its location. Since the lines between "the good side" and "the bad side" of main street / the tracks / etc. are unlikely to change in three years, I'd look at the $ / square foot of the directly neighboring (cheaper) area, maybe +5% due to the uniqueness of the project.
posted by slidell at 9:57 AM on April 10, 2016 [3 favorites]
What happened to me is unlikely to happen to you, but my story is an indication of how tough this path could turn out to be. You're considering a project that could turn out to be fairly massive and that has some big risks, as many people above are pointing out. Here is my own comment about risk.
Even if everything goes as planned, this is a big project, so you'll end up pouring in a good amount of your lifeblood. I think a project like that is more likely to be worth it if it was going to be your "forever" home. If it's a place you might want to leave in three years, it might be better to pick a less intensive project.
By the way, it's good you have cash reserves. The 203k financing requires you to front a fair bit of the money and not get the final 10% until the entire project is done. I found that process to be a bit of a hassle.
Anyway, on to the question you asked! I don't think it's very easy to answer. I would guess that the "brick warehouse conversion" market is pretty bifurcated. Is there even market demand for upscale hip industrial chic lofts in your city? Do you have the design skills (or budget for a designer) and the budget for finishes that would appeal to that market segment? I'd look to similar properties nearby for comps. If this would be the first project of its kind in that neighborhood, then you'll be taking on the risk of proving whether a market exists for this property in its location. Since the lines between "the good side" and "the bad side" of main street / the tracks / etc. are unlikely to change in three years, I'd look at the $ / square foot of the directly neighboring (cheaper) area, maybe +5% due to the uniqueness of the project.
posted by slidell at 9:57 AM on April 10, 2016 [3 favorites]
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I like transitional neighborhoods myself, I wouldn't let that deter me. But I wouldn't overpay for this. Also, when projecting your budget, you need a cushion of 20% of the total. Although surprises are limited when everything is stripped to the studs.
posted by Ruthless Bunny at 10:24 AM on April 8, 2016 [4 favorites]