Condo Conversion Deal??
I am curious on everyone's thoughts here. The building is somewhat expensive for the return. I will be converting this building into condos and selling individually.
8 units
Purchase price: $385,000 or $48125 ea
Conversion cost $30,000
Rehab Cost $24,000
Minimum/Worst Case ARV ($60SF): $57,780 ea
middle to low ARV ($65SF): $62,595 arv
middle to high ARV ($70SF): $67,410 ea
Profits at each price will be $8000, $45,000, $82,000
Profits include holding costs for 1 year although estimated time is 3-5 months.
These numbers include rental income and such since condo conversion is mostly a paperwork mess.
There is really only one comp in the area and it happens to be about a block away. The biggest thing is that there are two main entrances, not a separate outside entrance for each unit like most in my area. The comp is priced at $60SF but does not include a garage or central air (window air unit in comp). There are 30 units in the comp vs. 8. The comps interior condition is unknown other than at that price the units that sold recently all did so within a few days. Average days on market for area is more like 30 days.
Average of all comparable condos/townhomes in area is $82SF although as I said these have their own separate entrances.
I hope that I’ve given you all that is needed, but if not, please post it and I’ll get the info. THANKS.
Any takers?
Hi myfrogger,
I chime in on this. Your low end looks a bit thin. Your mid range profit is only 11.6 % over purchase price. I guess the question you need to ask is whether your assets could be used doing other deals that might be better for you. You didn't indicate how much you would have tied up in this one. The time turnover factor is certainly another consideration.
I started a conversion on an 8 unit along time ago. This was a conversion to a coop rather than a condo. It took the attorneys a long time to complete the paperwork. In addition, there was work that was needed to be done before conversion would be approved. A sudden surge in RE values made it more attractive for me than to complete the conversion so I wound up selling the property.
Good luck with this. I hope this is of some help.
Regards,
Ed