Co-op appraisal valuation

[David F.]

My solely-owned LLC owns a 10-unit townhome-style apartment building in TN. All units are identical. I am considering selling units off as they come available as co-op's. Its doubtful that the municipalities involved would sign off on a condo conversion or subdivision, as their aren't many rentals in the area. However, there aren't many good tenants as I've come to find.

Condos in neighboring counties go for $220/sqft, apartments $135/sqft. Typically, co-op's are less valuable than condos for a number of reasons such as supply/demand, lack of investor interest, older units, estate planning issues, financing and board policies. 

However, these units are new and there is not a significant oversupply of any kind of housing in the area currently. Additionally, by virtue of owning all of the units I could, with the help of an attorney, construct the bylaws in such a way to maximize value and eliminate bylaws that would be value-restrictive.

I've talked to a couple of non-QM lenders who could provide financing to buyers under such a scenario, but the tricky part is appraisal value, especially in a state where, according to Redfin, no co-op's have sold in the last 5 years.

If I got a couple units sold using seller-financing at $220/sqft, since there aren't any other co-op comps, would this provide a basis upon which an appraiser would provide a valuation closer to $220/sqft than $135/sqft? Any advice is greatly appreciated.

[Karen Wanamarta]

@David F. What's the zoning on the property and do you have a relationship or contact with the local rep?