Buying an upzoned 1926 5-unit. What does redevelopment cost/how?
Hey y'all. Residential RE investor wanting to becom CRE investor here. 

Can anyone tell me if I am missing anything? 

I found a property with 8% cap rate (I live in a medium sized city in Canada), built in 1926. It's possible that in the future I could tear this building down and develop an apartment complex. 

It looks interesting to me. Long-term tenants, stable financials.

The fact of it being built in 1926 is obviously a red flag. But with opportunity for redevelopment I see it as a good option. If it becomes unsalvageable we could rebuild it into a nice new building. 

Cost of the property is 750k.
We have 500k cash on hand. 
Down payment 290k.

Is this too risky? How would the finances work? If we decide to redevelop, how much of a loan could we get? With my research, it seems I could build a 10-12 unit building here for 1.14M. 

What am I missing?
Am I insane lol
[{"id": "i3fwud5", "text": "I mean, you should model this out before buying.", "replies": [{"id": "i3g7ov8", "text": "Ok how tho", "replies": [{"id": "i3gd3sg", "text": "If that\u2019s your genuine response, you should either \n\nA. Bail now, and find something simpler, that doesn\u2019t require a commercial note. \n\nOr,\n\nB. Find a partner that knows how to determine if it\u2019s a good deal, and able to\nMake changes to the budget/model on the fly to make sure it remains a good deal with unforeseen changes. \n\nI\u2019m genuinely trying to save you a lot of headache, not trying to gate keep at all. Knowing how to model your deals and having up to date knowledge of costs is key to making commercial-financed projects worth it.\n\nAlso worth noting:\n\nAn 875 sqft home from the 20\u2019s isn\u2019t a big deal, because even if everything is wrong with it, you can likely still come out of it ok. \n\nThe bigger the structure, the more Leary I am of older construction. Abatement alone could run into the 10\u2019s of thousands, and that\u2019s in addition to your major hard costs. \n\nTread lightly, and consider looking for 2-4 unit deals to get started. Once you have a team of people you trust from Previous, lower risk projects, you\u2019ll have a much higher chance of success as you move on to 5+ unit deals.", "replies": [{"id": "i3hxgv7", "text": "Why is it always \"get out\" and never \"this is what you need to learn to succeed\"? I take risks, I succeed, I can learn anything, what is it that I need to know in this situation? I also am looking at a 4plex that's completely turnkey. Obv the downside is no room for improvement so ROI over time won't be as great. That's why I'm making this post! I want to know what I need to know. There are seemingly no clear straightforward resources about this.", "replies": [{"id": "i3l1oq4", "text": "Taking at face value that you'll work hard and learn enough to succeed, you still very likely won't be able to do it in time for this particular property. If you want to get into CRE:\n\n* A key value-add of a real estate analyst is the ability to build a financial model, forecast performance of a property, and appropriately value the asset. A LOT goes into this, but you can start with the resources available at Adventures in CRE.\n* Aside from the financial analysis component, you need to really understand the zoning / land use policies of the place where the property is located and all the processes and procedures for getting land entitled. If your plan to (re)develop doesn't comport with the existing regs and if you can't get variances, then you can't redevelop it per your plan. Full stop, end of story. So you really have to dig into the zoning ordinance and comprehensive plan of your municipality.\n* You need a team. Land use lawyer, planner, project architect, engineer, MEP, contracts/closing lawyer, general contractor, landscape architect, interior designer, environmental consultant, hazardous materials abatement/disposal, etc, etc, etc. You can't do this by yourself, you'd need more than a lifetime to gain all the required knowledge and credentials. So, leverage your personal network for recommendations and/or talk to owners of new construction/ rehab projects in your area and see who they use. Or google those projects and see if the hits name the architect, engineers, etc. on the project.\n* You'll need financing. I doubt you could finance this project yourself, and even if you could it'd be kinda dumb to do that. You'll need a commercial loan. But lenders will consider your experience in the field when underwriting the deal, and they may not lend if you don't have experience. Commercial loans/mortgages are very different from personal mortgages.\n* Your project management skills need to fucking be on point, no cap. You have to keep track of multiple timelines and every damn piece of documentation and follow up and follow through constantly, day after day. IMO this is by far the most draining part of development.\n* All the above is interrelated. And for all these reasons, I highly recommend you spend more time learning and start with a smaller project. A smaller rehab or new construction. Flip it for a profit and put your gains and experience to a larger project.\n* Again: Adventures in CRE, zoning ordinance, network, mental fortitude.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "i3j5ml9", "text": "I mostly agree with others that it is a good idea/essential to get a partner with experience that you can learn from. That said, how risky it is to you depends on your overall financial situation. If its pennies to you, then by all means learn by experience.\n\nModeling takes a ton of reps to really get proficient at (think iterative process of building 100's of models and honing your assumptions based on what the bid winner paid before you finally get an offer accepted), let alone managing a development. But, if your looking to get an overview of modeling, I've found [this guy's website](https://www.adventuresincre.com) to be fairly helpful. I use some of his excel models for quick feasibility calculations. Tbh though, I'm starting as an MBA with a real estate emphasis. Even with that, I still don't expect to buy my first property until I've worked for other people on their own deals (initial modeling, basically grunt work stuff). There are tons of nuances in real estate that you can only learn from experience. In my opinion, its best to do as much learning as you can by working with experienced people before taking the dive yourself.\n\nEdit: If you have the building financials (mainly a trailing 12, tax info &amp; your expected loan details), feel free to DM me and I can help you with setting up a model for it. Probably can't help much with the development aspect, but I can help you get started.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i3g88mm", "text": "You should purchase a financial model from\nAdventures in CRE", "replies": [{"id": "i3g9avm", "text": "This, plus take a course in how to use it", "replies": [], "depth": 2}, {"id": "i3i3u57", "text": "Oooh at first glance that looks great. Will do, thank you!", "replies": [], "depth": 2}, {"id": "i3j7wia", "text": "ah wish I saw this before I responded. Yes, that website is great. Love the tutorials on how to build up the excel models.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i3gwa0o", "text": "*\"Can anyone tell me if I am missing anything?\"*\n\nFrom your comment history, my guess would be; experience.", "replies": [{"id": "i3hxli7", "text": "Yeah obviously. But how the fk else am I supposed to gain experience other than doing it lmao", "replies": [{"id": "i3i25f9", "text": "You didn't ask that question.  You asked what you were missing.\n\n*\"The fact of it being built in 1926 is obviously a red flag\".*\n\nThat's not a red flag, that's the age of the building.\n\nWhat does the age of the building tell you? (That's a question.  What is the answer?).\n\n*\"Is this too risky?\"*\n\nThere's no way to know from any of the data points that you've provided.\n\n(Get more data points).\n\n*\"How would the finances work?\"*\n\nSame here.  More data points are needed.\n\nYou could be the sharpest person ever to come out of \"*medium sized city in Canada\"* (which, if the rumors are true, is a very lovely town) and, buying a property with not enough information, but shitloads of cash down....could be a walk in the park.  It could as easily turn into a money pit that the only viable solution would be bankruptcy.\n\nNeither of those two extremes is likely but....my point still stands:  You lack experience.  You need more data points.\n\nFind some good books on real estate.  Learn the terms, the lingo.  Look up the owners of some apartment buildings of similar size (age too if possible).  Ask to take them to lunch.  Tell them you don't know shit from shinola and you're hoping they'll take the time to teach a  greenhorn a few tricks. \n\nThese people have something you want....experience, and their valuable time.  Don't go in empty.  Read those books FIRST.  Show these people the same respect they are offering you....by being prepared to absorb the information they will provide.  Do your homework.\n\nYou may be a greenhorn.  That doesn't mean you *have* to go in green.\n\nIf you ask 10 people that question, you'll probably get 7 that will say *\"sure kid...meet you at Tim Hortons on Genesee street on Tuesday at 7:00 a.m.\"*\n\n5 of them will be instructive, 2 of them will amaze you with stuff you never thought of, and 1, will become a lifelong friend that you'd never have met any other way.\n\nAsk a few key questions and then......listen.\n\nDon't talk.  Zip it. STFU.  Don't try and impress anyone.....you can't yet.  Shut up.  Listen and...when it's over, say *\"Thank you*\" and make sure they felt you meant it.\n\nOne more thing....if any of them tell you they have a great deal for you.  Say \"*thank you...I believe my train is leaving just about now...it's been fun*\".\n\n(Don't forget about the STFU and listening parts).", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i3hftev", "text": "What is your total buildable area and per sq ft construction costs?", "replies": [{"id": "i3hxzob", "text": "200/sq ft for construction costs. This property is ~6000 sq ft buildable", "replies": [], "depth": 2}], "depth": 1}, {"id": "i3k34jk", "text": "Have you ever done ground up development before ?", "replies": [{"id": "i3kvm2t", "text": "No but my partner has. Albeit in another country but still.", "replies": [{"id": "i3kyz8i", "text": "ok that\u2019s good at least. probably wanna partner with someone local still. city/state/country regulations are a bitch, as i\u2019m sure you know.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]