Illegal Triplex
Hello again,
I am interested in an illegal triplex...the offer is great however, the county believes it is a sfd. How should I word my contract to protect myself? What is the worst thing the county could do if/when they find out? If I apply for the zoning change before closing, how long does it take?
Any other issues I may be overlooking? The neighborhood it a mix of sfd and du/tri's. I have a verbal from the county that it is OK for this to be a tri...but verbal is no protection.
Thank!
This is a tricky subject. Most of your questions can be answered through research. My first question is: What is it currently zoned for? I bought a property that was a triplex that was zoned for a SFD, but it didn't pose a problem because it was "grandfathered " in. Where I live, changing the zoning costs anywhere from 3-10K. Some of which is non-refundable if denied. My gut says, if there is mixed use in your neighborhood, then it shouldn't be a problem. Just make sure you have good tenants and your building is kept in above par condition. It is a risk, but one that can be evaluated through research. Good luck.
Matt
Matt,
It is currently zones r4. I was told that it could be either a duplex or triplex with no problem - by the county. They didn't mention money. I had no idea it could cost so much.
As for above par...it's a fixer upper. I'm not sure I could get insurance since one of the tenants has a pit bull.
Do you know if I call the county and start the process to change the zoning, could they shut me down until it is complete? I would lose money then. I'd rather walk now than have that happen.
Thanks
If zoning R4 allows a duplex or triplex then I don't see a problem. The figure that I threw out was based on my area in NC. In other words if the current zoning allows its current use then I wouldn't make any calls to the zoning board, just to your mortage broker so you can get this deal closed.
Beth:
Nice to meet you!
You could place the Title to the property into a Land Trust and have the Current/Future TENANTS to accept Beneficial Interest inside of the Trust IN RETURN for their:
1- occupying their particular unit
and
2- timely pymts on their respective portion of expenses(1/2 for 2 units, 1/3 for 3 units, etc.) Taxes, Utilities, etc.
The Tenants' conversion to RESIDENT BENEFICIARY(S) removes the prior Landlord Tenant status and...Becomes a CO-Beneficiary Status inside of a trust.
Also the Trust itself along with it's agreement terms, etc. are NOT PRIVY to zoning or housing enforcement attempts to deem the property is not being utilized other than it's intended use. Your Trustee will KEEP THESE DETAILS PRIVATE!!!
If the zoning/housing -Busters come calling or inquire to the Trustee about the use of this (your) PRIVATE LAND TRUST RESIDENCE the Trustee will aptly reply :
"GO POUND SALT!!!"
As my Friend and Mentor BILL GATTEN told me.
I hope this helps you can review more details on CONDOMINIUMIZING your Property W/O the re-Zoning Costs!
at:
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=189
Make it a Great Day!
Derrick AliI
Ah, the illegal du/tri/4 plex!
In my area there are thousands of such, and it's nothing out of the ordinary.
And no problem when selling.
Just openly & fully disclose that the RE may be an illegal or unpermitted multiplex, and you're making NO representation or claim about the property's usability as a multiplex, and the buyer is assuming any and all responsibility for the subsequent use of the property, should he buy it.
The buyer, thus on notice legally, can then accept or reject the property but can blame you for nothing since you've fully and openly disclosed all you know.
You wouldn't believe the language and disclosures I quite normally insert in my contracts on properties I'm selling, such as:
"Buyer is hereby on notice that the property may have poisionous snakes, spiders, mice, rats, lions, tigers, alligators and wolves, and buyer is taking full responsibiity for doing his own property inspection to determine ANY and ALL conditions of said property prior to his purchase thereof"
And they sign it without comment !!!!
John,
How do you secure financing and insurance for these properties with " illegal use"? I submitted an offer and am waiting to hear the news...I made it contingent on the seller legalizing the tri...if this fails I'll lowball and do the conversion myself. Any advice ? I'd appreciate some input from those of you who have " been there, done that" before.
Beth
I'm sure no inst. financing whiz, as most of my deals are done with pvt. investment $$$, mine or investors; however, isn't a 4 & less, looked at as & identical to a SFR by all lenders?
If I'm buying triunit income producing property, than I want what I bargained for- three units of revenue. If zoning would shut me down to 1 unit, I would be severely damaged---unless I bought it as a single family with the "potential" of converting this to a legal, 3 unit property. That's why you're getting such a fantastic deal.
The onlly prudent thing to do is to get the property legally cleared for 3 units. The county says there's no problem then have the owner at their expense make it legal.
Just found three other contracts came in and the seller is in shock - apparently they were all bad. Mine was fair and the only "bad" part was my asking for him to get an "after the fact" permit for the triplex. His agent said mine was not the best. Any ideas of how to sweeten the pot w/o going overboard?
Sammyvegas
You might be interested in an article on this site, by Derrick Ali, re Condominiumizing small apts, then selling those units.
The way he's laying it out, it could be done so as to legally have several "units" in any large SFR, all very legal it appears to me.
If you'll find the Articles by Derrick, then that particular one, I think you'll be fascinated by the possibilities, just as I am.
Thanks JOHN M!
I only hoped to show that there is MORE than ONE Way to Skin a Cat--I mean Code Enforcement Ofcr.!!!
lol
Derrick
Yeah, but assuming 5 years from now the property is burned down, the grandfather clause won't save you. New buildings will have to meet the current zoning requirements.
Although I'm guessing Derrick's solution will probably get around that too.
Derrick
It sure would make a great article if you'd discuss in some detail one or two of the deals where you HAVE done a condo, then sold one or more of those units.
Very creative of you & you've got me looking for suitable units around here.
Since I'm very close to a lawyer & could probably impose on him to do condo articles, etc., for me, so that's one expense I could avoid.
JohnMerchant,
Unless you're married to one or it is your Mother, I can't imagine a lawyer eating the cost of condo docs...I hear it's expensive.
More power to you!
I got side tracked on a waterfront villa deal...but the tri is still of interest. Tonight I'll peruse DerrickAli's article.
Thanks guys!
Beth, since I'M the lawyer, I guess I'd do as cheap as it could be done!