Converting SFH to Multi in Baltimore

[Sebastian E.]

Hello Baltimore BP folks,

It was a pleasure meeting some of you at @Account Closed lunch on Friday. I learned a bunch in that hour and a half. For those who are thinking about investing it is a great way to meet folks from the entire value chain of real estate from wholesalers, to plumbers, to hard money lenders, to other investors.

I have decided to take the plunge and purchase a property in Baltimore. I am looking for either a large SFH (3500 sq ft plus) or up to a 4 unit that I can purchase using low money down financing with a Fannie Mae 5% down loan product. From a financing perspective the easiest would be a SFH that is currently quasi converted that I can finance as a SFH primary residence. If I do a multi I will have to increase my down payment to 15% which I would do for the right cash flow deal.

Two questions for the group:

-Do you know how difficult it is to convert a SFH to say a 4 or 5 unit multi? It seems like plenty of people have done this although the zoning seems quite tenuous to do a conversion. Does anyone have any experience on this front? Is the city actively trying to restrict more usage for multis because of the oversupply of housing?

-If anyone knows of any off market deals for larger SFH in Reservoir Hill, Madison Park, Station North, Old Goucher please keep me in mind. Same goes for positive cash flow multi units up to 4.

I am looking forward to continued networking with you all in the coming months.

Thank you,

Sebastian 

[Frank Chin]

Originally posted by @Sebastian E.:

-Do you know how difficult it is to convert a SFH to say a 4 or 5 unit multi? It seems like plenty of people have done this although the zoning seems quite tenuous to do a conversion. Does anyone have any experience on this front? Is the city actively trying to restrict more usage for multis because of the oversupply of housing?

Sebastian 

 Not a Baltimore investor, but generally looked into the issues. The first thing is each town, county has a city planning department, and this issue falls into their jurisdiction. My wife worked in city planning, and this is where citizens, developers come to seek advice.

As to restriction of units due to oversupply, this is a new one. In my area, people often try illegal conversions due to the lack of units. But the main reason for enforcing zoning laws are:

1. Control overcrowding in schools. Where I live, it's zoned for 2 families, and developers bought all the SFR they can find to build 2 families and make a bundle. What happened? Five blocks from me they're building another school. This is as of right zoning that they can plan for. Imagine people coming in adding even more illegal units, and you'll be overwhelmed with students.

2. Traffic and parking. If you had five SFR on a block, and everyone converted them the fourplexes, assuming each unit has two vehicles, you now have you go from 10 vehicles to 40 vehicles. Where do you find park parking for 30 more cars.

3. Utilities, The electric grid, water, and sewer is built for a certain planned for population. Add several times that, you'll have blackouts and sewer backups. 

4. Transportation infrastructure. In New Jersey where I lived for a while, the increasing population means existing roads have to be widen and new ones built. Towns have a master plans where this is all planned for. But when unplanned for things like rampant illegal conversions occur, it overwhelms the infrastructure.

When you do conversions, particularly adding more housing units, you're acting as a developer, and have to take into consideration the wider community, and what effects you do has on it. They are not restricting it so you can't make money. But if they allow you to do it, they have to allow everyone else to do it.