Condo Rehab Project

[James Dunn]

Hey Everybody I just got a seller to finance me 4 condo units worth 70k ARV each at 15k each. They need 10k in repairs each. Does anybody have any ideas on how i come up with the money for repairs or know anyone who does joint ventures for a profit share or equity split

[Dion DePaoli]

So the property is a four-plex that was converted into condos. The Seller owns all 4 units.

Was an HOA agreement put in place, where the deeds properly restricted and split?

I would explore how these units were converted and make sure everything is in order with proper HOA paperwork, etc. I would also go back and make sure the units in the BPO's are indeed similar to this project. Living in a 4 unit condo building is not the same as a 100 unit complex down the street. It is also not safe to simply use square feet as the only filter in comp selection. Lots of these smaller complex conversions have been adjunct failures and I have seen many get converted back. It might even be, after scrutiny of the comps, the best use for this building is actually a four-plex under one deed.

It is really hard for me, based on this being a 4-plex converted to think this Seller has done a proper job of converting these. Just the legal paperwork alone would increase his cost basis past $10k per unit. Let alone any construction costs needed to comply as well. Generically speaking at $10k a door, you are paying for rental units like in a 2-4 unit or multi family project. That is general price for rentals, but cost basis on condo conversion generally are closer to $30k to $40k per door.

If the Seller has screwed the conversion up, you can cure it or you can unwind it. I think you really have to dig into this conversation, be careful to make sure things are as they seem.

If the project is good to go, in most likelihood, the condo will not be eligible for conventional financing. So, if the plan is to sell, you may want to make sure you go after some cash buyers.