Advice On Apt To Condo Conversion.
This is my first post here, hope it is in the right place.
I have owned a business for about 9 years and am getting a little fried. I have been looking for something else to get into and would like some advice on whether or not it is a good plan. I have completed the Mass. real estate course, and will be taking the test soon, the purpose is not really to sell but to save a little on commision when buying and selling.
Anyway what I would like to do is to buy existing 6+ tenemant houses in the area, convert them into condos and attempt to sell to the existing renters. In our area these units are abundant, right now, there are over 150 on the market. The city I am pursuing is lower income therefore many of these folks are destined to rent forevor. With houses costing at least $250,000 most of these folks will never be able to own anything. However if I am able to buy a 6 unit, for around $320,000 (which is very doable) put another 12 to 15K into the property for the conversion, and sell each unit off at 85K, will it work? Normally 2 BR condos are going for 105 to 125K in this area so they will be purchasing below market value. My lender is going to be working on no money down programs to the client to finance them so essentially they will be able to move from a rent payment to a mortgage payment seemlessly.
I am hoping that some of you more advance folks will be able to pick out flaws in my plan. To purchase the properties, I have a private investor who will finance the entire project at a 1% origination fee and 10% deffered interest, with a payoff target of 12 months.
Thanks for any advice or insite you may have.
Joe Pacheco
Joe I am in the process of doing the same thing in CA. Are you looking for more investors with your project or do you need to know what you have to do to convert apartments to Condo's?
rfer I tried to send you an private message but it didn't go through. Right now I am seriously comparing properties. I am looking at 2 with what I feel have very good qualities and would like to turn them over quickly. I am mainly looking for advice on what to lookout for, or any holes in my plan. However I am always interested in other investors, for a win, win, deal. Email me direct **Please See My Profile**
Joe Pacheco
Joe,
If and when you do find a property to convert, I can guide you through the technical aspects of condo conversions.
I've done a number of mullt-family conversions in the metro Boston area.
I can also give you the name and number of my attorney, who specializes in conversions.
Good luck.
[addsig]
I should start off on saying I have never converted a building, but have bought into convertions before they went public.
My only thought on this is to maybe get a building under contract and then poll the residence to see if this is something they want. Many people don't want the "hassles" of owning. They want to know that they can pick up the phone and report a problem, instead of trying to figure out how to fix it themselves.
Also the people's credit situation. With rates being what they are now most people that qualify can qualify for a home I think probably have. Do you have a loan program worked out for lower credit scores and high LTV?
Lastly, is $85K what you think the FMV is or are you doing this as a "favor" to the tenants. I would personally expect not all of your tenants to participate in the program and then you have to sell to the public. Selling a few units below FMV could damage the FMV of the other units and possibly longer holding costs.
I just bought a condo in a 54 unit conversition and out of that many units only 4 people took advantage of the below market pricing. We bought at $105 a sq. ft and now units are selling for $150 a sq. ft - 6 months later. I will never know why many of the others didn't take advantage of that.
Monkfish
I would like to take a ride up to where you are and buy you lunch, and pick your brain. This is my first entrance into real estate investing, if you are available, joepbio @ www.Gmail.com
Thanks
dnvrkid
That is my major concern is are these folks willing to buy, you mention about getting a contract and then polling the residance, I am assuming if the outlook is not good that I put into the contract a way out? If so I would clearly have my lawyer handle this but would that give the seller the oppurtunity to opt out as well?
As stated in my prior post I have never done one of these, but I would think you would need to put into the contract a statement that the purchae is contingent on buyer's approval final approval with a date of when that will be.
I would think that you will have a VERY difficult time in getting the renters to respond back to you as many will not know what is going on, have horror stories about loan approval processes, etc and will start looking for a new home.
I would think the only way you would want to do this is see if it works financially for you to sell them to the general public and if some of the renters take advantage of the offering you can discount it to them.
Like I said I just bought a unit in a 54 unit apt bld that was converted only 4 out of the 54 took the sellers up on the offer and the mortgage payments were basically the same as the rent payments and they used your security deposit as the down payment and offered 100% financing.
To me you can't get much of a better offer than that and only 7% of the people took the offer. 6-months later there are only 2 units left so it is a highly desirable area.