Today’s question comes from Adam. I’m looking to reposition a four unit apartment building. The construction budget is $60,000 and we have a quote from a contractor. Construction material and labor prices seem to be changing regularly. The building is currently vacant and the longer I wait, the larger the negative cashflow will eat into the viability of the project. The property is a C-Class property and I’m trying to figure out how to finance the construction with a bridge loan of some kind. The property has an existing mortgage on it, and the after repair value should be high enough to support the increased loan amount.
The building is 110 years old and we will be replacing kitchens, bathrooms, and a total of 60 windows. We will be redoing the electrical panels, but re-using the existing aluminum wiring.
I’m concerned about a hard money lender wanting to charge too much for being in second lien position, and the bank financing has several years left on the loan with a pre-payment penalty which I don’t want to pay. The pre-payment penalty would increase the cost of the project and impact its viability. How would you suggest that I finance this project?
Host: Victor Menasce