I recently attended an informational event on programs available to investors to receive rehab funds for investment property. The program promises significant financial incentives of up to 17,500 hundred per unit if you keep rents at a certain level. Yet like most other governmental programs the devil is in the details.
First you need to work with the City to develop a scope of work. Then you will need to have the work performed by a licensed contractor. So let’s say you are looking at a property and the water heaters have been stolen. If I am not using City money I can go to home depot buy one and have it installed by myself or one of my workers for 60 dollars. If I go the City route I will have to have permits pulled and have a licensed plumber do the install to a tune of 200 dollars. Assuming I can get the city to pay half, remember the funds are provided on a matching basis, I’m out of pocket 100 dollars, 40 more than if I did it myself.
I have looked into these types of programs before and every time I chose to forego City money because I felt I could do it cheaper and quicker on my own. That being said, I think this program could be beneficial in a few different scenarios:
1. You already rely heavily on contractors
2. You are a licensed contractor with the city and can pay yourself for the work
3. The work needed would require permits to be pulled anyway (WE Energies involvement)
As an example I am looking at purchasing a 30 unit apartment building with mostly cosmetic repairs needed (no major electrical or plumbing issues). I would consider participating in this program to fund window replacements, cabinet upgrades, etc. However, before I did that I would register myself with the city as a licensed contractor.
I would love to hear from people who have participated in this program and get their feedback.
But biggest kick I got out of the event was the representative from PyraMax bank who freely passed out his card, and gave the impression that they were ready to make loans. When I told him I had just talked to their business banker Mike Bradburn 2 weeks ago and he told me the bank didn’t have an appetitive for investment loans right now, he replied “this is different because this City’s involved”. What does having the city involved have to do with me successfully completing a rehab project, out side of ensuring it’s going to take longer and cost more than if they weren’t. I suspect that many would be investors who think they just found a source of funding are going to be disappointed. As many of you may know I am currently doing a blog series on my quest to secure bank financing for investment loans so I found this particularly humorous.