I got a call to bid on a large (for me) low-income housing rehab project, several adjacent apartment buildings – in some ways similar to one I just finished. Last one was rehab apartments into townhomes, another big difference is, the owner says it is being financed by a “corporate grant”. She says she has been pre-approved for 850K, 50% of which is allotted for rehab. I know nothing about this, anyone have any experience? Warnings, horror stories, etc.?
View Image “Good work costs much more than poor imitation or factory product†– Charles Greene
CaliforniaRemodelingContractor.com
CaliforniaRemodelingContractor.com
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By "owner" do you is this a none-profit group? I don't know why any "corporate grant" would be used to rehabit aparements for another profit making person or company.
And what is the the other 50% to be used for?
Before you get too far into it you need to find out a lot more.
One of which is how they make payments, what kind of inspections, phases, etc.
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
I don't think that the "corporate grant" financing is all that important. AFIK, corporate grant dollars look, feel, and spend just like any other dollar. - lol
From your post, you've been asked to convert "several" apartments into townhouses and there's a budget of $425k.
My questions at this point would be:
With this info, you should be able to come up with a bid.
Actually, because its a corporate grant, I get the distinct feeling the dollars spend a little easier than the kind that come from the owner's savings account. This because she (owner) told me price is not the selling point, quality is - I just don't wanna have to mess with the buildings for another 20 years after this rehab.
Its not a condo conversion - that's the one I just finished. Its low-income housing (section 8) rehab, and this time the rehab has to be done with people living in the units - ugghh!View Image “Good work costs much more than poor imitation or factory product” – Charles GreeneCaliforniaRemodelingContractor.com
Run, man.................RUN!!! - lol
Back in my Navy days in the early 70's, I managed a 16 unit apartment complex for a dentist. I got a great deal...............free rent, charge accounts at a couple of hardware stores, and a few bucks an hour for my time when I cleaned one up and rented it to a new tenant.
About half of the units were Section 8 and they were all wrecks. The owner finally decided that he wanted to get away from the Section 8 market so when one of the units opened up, I took it off the Section 8 list, rehabbed it for a more upscale occupant and raised the rent.
Cleaning those places was terrible. In one of them, there was over 2" of food crumbs in the carpet (green shag, of course) around the couch. Because of the stench of rotting food, I had to move the refrigerator into the parking lot and hose it out. It never lost the smell, so I had to replace it. Oh, did I mention the roaches.............mice,.......................rats?? - lol
When I got discharged, he offered to sell me all of his rental properties (30 units altogether) for $160k - and even carry the paper. I thanked him for his offer, but declined. I've never even been tempted to be a landlord since then.
It's easy to lump every section 8 tenant into one large generalization pool. It's also not necessarily correct. I'm not familiar exactly with the term corporate grant but it sounds like a HUD program. HUD doles out the federal dollars in the form of grants. Anyone can apply for them and it sounds like your investor contact is smart enough to tap this source of financing. The money is lent through banks, just like any other loan but it's funded by the federal government. This doesn't sound especially risky to me. After all, there are thousands of rich contractors who have figured out how to make money using federal loans and grants. A grant often is given in a form that requires the borrower to meet specific criteria. If the criteria is followed often the grant is forgiven and the borrower NEVER HAS TO PAY IT BACK! Also, the grants often come in the form of low interest rates. The purpose of these loans is to provide business with an alternate source of funds so they can/will participate in geographical areas that might be overlooked by investors. Translation: free money entices legitimate contractors to serve the needy instead of focusing all their dollars and energy in upscale McMansion subdivisions. Your risk will be in the estimating process. As long as you enter a large enough PIA in your bid because of working around tenants, then you probably have a great lead on your hands.I know of a fellow who has successfully done nothing but these kinds of contracts for the last thirty years in MI. Sometimes, he has 100 people working for him, other times it's just his base crew of 15. He travels all over and has gotten very wealthy from these jobs. Do your due diligence and give yourself a hefty profit margin. If your bid is too high and you don't get the job, you have lost nothing but a little time. Bob's next test date: 12/10/07
I'm resurrecting this old thread because, believe or not, I just got this email about it this morning:
Hi - I know you have not heard from me for awhile but I had to wait until the grant came in well I got simeone who is going to support the project. this should start soon, Get back tp me call me
So I called today, she said I have to meet with the bank next week, and work should start in approx. 6 weeks. I'm not holding my breath - but I am saying my prayers!
Glad I hung onto my w/c and gen. liability, and glad I hung onto my jobsite trailer. Should be a good 6 month project, at least. Couldn't come at a better time.
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Edited 7/22/2009 8:11 pm by Huck