Condo Conversion - Big Deal Or Not?
I've got 24 rental units. One parcel, 6 4-plexes. It's a secluded comp[ex on 1.6 acres. Units are 1100 Sq. Foot townhouse units (2/1.5's).
I think it would be a good project for a condo conversion. I've got 2 main questions.
First, what does a condo conversion entail. Are there any good sources of information on how to do this? Who do I talk to in the city and county offices? What guidelines and standards generally need to be met. How extensive is this in terms of time and money? BTW, built in 1983, separatly metered for gas and electricity.
Secondly, one of the most appealing aspects of the idea is that I could own 24 condos (and have more equity) and have a line of credit (or perhaps 24 lines of credit for that matter) accessible to me. Is it reasonabable to get a 100% LTV HELOC on a NOO condo?
Thanks for your thoughts.
I've been looking at condo conversions here in Southern California. Here is how I'd start the process:
1. Look to your local minicipal code or building code and see if condo conversions are specifically addressed. Here in CA most cities address conversions and the requirements vary dramatically. Parking requirements is the first place I'd look at.
2. Again in CA, you will need to get fee title for each unit, which involves getting a vested tentative tract map. This typically involves planning commission approval.
3. Once a VTTM is granted by the city, the Department of Real Estate becomes involved. Ultimately, again in CA, you will need a "white" report to sell your units.
From what I know, typically units sell for about a 20% over apartments based on a building both having a "white" report and being a suitable candidate for conversion.
If you have lots of studios or one bedroom units, or if your units are small, then your building may not be suitable for conversion. Remember, you are going to sell units as condos, and therefore you are competing against this segment of the market.
Likely you will have to evict tenants while you are upgrading units prior to sell. During this process you may have to get a construction loan to pay off your existing financing and to perform the rehab. Check with a few lenders to get an idea of their underwriting guidelings, including their equity requirement.
I hope that helps.
This is excellent advise. I am also looking to do my first conversion if the numbers work out. Anyone else out there that has done it that can offer advise and pitfalls?
Thanks