Thoughts in general? Architects?

[Mayer M.]

Hi, So I’m purchasing a single family dwelling currently 1850sf with a basement. It will be converted to a triplex the basement and fIrst floor one unit and 2 additional units above and will end up approximately 2100sf + basement. Purchase of $150k, $200k rehab budget. Should generate $4500 per month revenue with property taxes being about $500 per year with a 10 year abatement. ARV should be around $600k. Property is located in the Brewerytown section of Philadelphia. My architect is charging $9k which includes everything. However, a developer mentioned it would be a wise idea to do a condo conversion even if I’m planning to keep the property. The architect says he will charge me an additional $1k per unit if I do a condo conversion because his insurance comp I considers condo higher risk. Is this normal?

[Nik Moushon]

I'm an architect. 

Condos have the highest amount of law suites of any field by a good margin, even more than medical suites. At least in dollar figures; not sure about sheer number. Not only does our professional insurance go up but so will yours, by a lot. This is because the odds of there being a law suite sky rocket. So yes this is very normal. And really a lot of architect plain out won't do condos even though they do large MF buildings because of this very reason. And its also very common for developers who build new condos to turn around and sell them within a couple years because they don't want to keep that kind of liability on their books. Plus once sold they dissolve the LLC that built it and then all the condo owners are out of luck when they want to sue, regardless if the reason is justified or not. So if the "owner" who built it isnt around anymore who do you think they target next? Yep, the architect and builders who conveniently, for them, dont get to change or dissolve their LLC or company after every new construction.

Besides liability there also the problem of selling and zoning. Instead of selling a single triplex you are now selling 3 condos. Then you have to set up a condo association (HOA), your taxes are different, your insurance is different, etc. There are way too many things that are different from a condo than a traditional MF. Granted I know you can still treat it similar by you owning them and renting them so in the end there might not be that much different but would you really consider selling one off while you keep the other two? To sum it up I don't think a condo is worth the effort for only 3 units. Especially when its a conversion of a SFR like this situation.

Stick with a traditional triplex and skip the extra head ache for no extra return.