Rental Property Investor · North Chelmsford, MA · Member since 2017 · 31 posts · 7 votes
Hi all, I may have an opportunity to buy a two family in the Cambridge Somerville area. estimated 800-900k. I don't think the rents would support it however a lot a people in the area have converted these types of homes to individual condos. each condo selling for over 500k. My question is has anyone here done a conversion like this in this area? where there any hidden costs to think of? Was the process straight forward?
chris
Investor · Somerville, MA · Member since 2015 · 34 posts · 7 votes
9y
Hi @Chris Conde - I had never done a conversion before and then I converted both of my Somerville 2Fs to condos over the past 12 months. Here's what I had to do. Some of the steps are specific to Somerville (statement of condition, separate water metering).
Give tenants 12 months notice, 24 months if they are disabled or elderly
Create your architectural documents (unit floor plans, site plan)
Create your standard condo docs with an attorney (master deed, declaration of trust)
Have a different architect come and provide a 'Statement of Condition' (this is the hardest thing to find - most architects will not be willing to take a small job like this - this is also only required in Somerville as far as I know)
Complete an application to the condo board (meets once a month)
Attend the condo board approval meeting, or have your attorney attend
Submit $500 fee per unit to the town
Prior to closing, separate all utilities with separate meters (electric, gas/oil, even water in Somerville)
All-in costs for 2 unit conversion...anywhere from $12k to $18k.
It's not the easiest thing in the world, but if you're organized and motivated to manage the project, it can be worth it.
Hope that helps. Happy to answer more questions here / via phone / over a beer.
Developer · Boston, MA · Member since 2017 · 125 posts · 137 votes
9y
Its possible, but there will a ton of headaches involved. If the units are big enough to be converted into its something to consider. But if they are only going to be 1000 sq ft condos it may not be worth it. Also, you are going look at getting rezoned due the work with a lawyer to create a condo association. Look what would be created, come up with costs to make it a single unit those costs are going to be high, and then headaches associated with it then figure out what the comps in the area are and do the simple math.
Investor · Somerville, MA · Member since 2015 · 34 posts · 7 votes
9y
Hi @Chris Conde - I had never done a conversion before and then I converted both of my Somerville 2Fs to condos over the past 12 months. Here's what I had to do. Some of the steps are specific to Somerville (statement of condition, separate water metering).
Give tenants 12 months notice, 24 months if they are disabled or elderly
Create your architectural documents (unit floor plans, site plan)
Create your standard condo docs with an attorney (master deed, declaration of trust)
Have a different architect come and provide a 'Statement of Condition' (this is the hardest thing to find - most architects will not be willing to take a small job like this - this is also only required in Somerville as far as I know)
Complete an application to the condo board (meets once a month)
Attend the condo board approval meeting, or have your attorney attend
Submit $500 fee per unit to the town
Prior to closing, separate all utilities with separate meters (electric, gas/oil, even water in Somerville)
All-in costs for 2 unit conversion...anywhere from $12k to $18k.
It's not the easiest thing in the world, but if you're organized and motivated to manage the project, it can be worth it.
Hope that helps. Happy to answer more questions here / via phone / over a beer.
Attorney · Newburyport, MA · Member since 2015 · 25 posts · 19 votes
9y
Hi Chris,
How straightforward the process would be depends on whether you're in Cambridge or Somerville. Somerville extends greater protections to tenants and has an approval process. Cambridge follows the state law, which is relatively less arduous.
In terms of costs, a Cambridge conversion would be around $7000. In Somerville, John's numbers above seem correct.
Good luck with your project! It's an interesting area to be working.
Investor · Somerville, MA · Member since 2015 · 34 posts · 7 votes
9y
I agree with @Rory Gill - it's going to be a lot cheaper in Cambridge. $7k for a 2F sounds about right.
@Mike Abramowitz - this depends on your current plumbing, so it will vary a lot. Here are the considerations...
Purchasing water meter(s)/reader(s) from the town - $325 for the pair. Any 2F already has 1 pair, so if you're just adding a second, it's $325. If you're going to have a pair for each unit and also have a common meter for the basement, then you'll need two sets - $650.
Plumbing work to separate the two units. This is where the major variance comes in. In your best case scenario, your units are already separated and all you have to do is add the meters. In the most expensive scenario, your vertical plumbing lines are shared between the two units, so you'll need to run new separate lines.
Plumbing work to get everything up to code. Again huge variance here, depending on how recently your plumbing was done and how much work is required for code upgrade.
Developer · Boston, MA · Member since 2017 · 29 posts · 21 votes
9y
Hi Chris,
I agree with the responses above regarding costs associated with the condoization process and if you need a for an attorney who's done it before, I can point you to a guy I like to use (he knows Cambridge and Somerville. Speaking with a local real estate attorney is a good first step.
More of what concerns me with what you're describing is what you would purchase the property for. Unless the two units you're considering are already "condo quality,"(new and high quality kitchens and bath etc.) an $850K purchase price with a $1 mil sell out is pretty tight. That spread will get eaten very quickly in holding costs plus rehab.
Rental Property Investor · Boston, MA · Member since 2012 · 257 posts · 139 votes
9y
Hi Chris,
As Max mentioned, your potential profit might be very slim. If it is a 2-family that has been used as a rental for many years condo buyers are going to expect all new surfaces, updated kitchens and updated bathrooms. In addition you need to think about the exterior. Condo buyers aren't going to purchase a condo in a property that needs to be painted in the next few years, needs driveway work, has landscaping needs, etc.
My feeling is that these issues are especially important for a 2-unit condo. Each owner will be responsible for 50% off any maintenance. In Sommerville you may also be dealing with first-time home buyers who are looking at condos because they want to avoid maintenance.
Finally, I may be mistaken, but I don't believe there is any need to separately meter water. If it's straightforward by all means do it and the condo fees and condo budget will be less, otherwise the costs can be apportioned based on bathrooms, unit size, etc.