"Illegal" Duplex Conversion...future Problems?
Hi All!
Looking into buying a "fourplex" from another investor. It's a 1920 building typical of the area (older and low-income) and there was a conversion done to it, I'm assuming without any certification from the city, to make it into 4 one bedroom units.
I realize that more than likely no one is going to go down to town hall and complain about it, (if they do, the city will force a re-conversion back to a duplex - spoke with the compliance department this morning without giving away location), but what happens if when I turn around and try to sell the property down the road, and the buyer has conventional financing, the inspector/appraiser comes out and sees, quite clearly, that this was an "undercover" conversion?
Are appraisers/inspectors supposed report these kinds of "violations" to the city? will the bank withold financing if the building doesn't meet code? What kinds of issues could I be running into?
Any thoughts? Thanks!
posherov
Perhaps I posted this to the wrong forum...
The other thought that occured to me is: If I was trying to get a building like this qualified for Section 8, would this conversion be an issue for the inspectors?
I'll repost in the Rehab section.
posherov
You might want to think about doing the de-conversion yourself. In most urban areas today a three bedroom is worth more than two one bedrooms and bythe sounds of it these deconverted units would be at least three bedrooms.
Other than that, it is a potential mess. The city could come in at any time and require you to come up to code (probably means de-converting). Make sure the price reflects that risk.
Likewise when you sell: the buyers willing to deal with this problem will be limited and the prices adjusted accordingly.
I agree with previous posts that there is some "risk" involved, and would expect a very high return on investment b/c of this. However, I think there is less risk than normal on these types. I see a lot of single families converted illegally into multifamily. At least in this case, there is already multi-family zoning in place if it was a duplex.