Rezoning for a Condo Conversion

[Christian Austin]

This is my first post in awhile. I've been around, but haven't been posting. Much has happened since my last post, but I won't bore anyone with the details. In short, I began wholesaling, and recently ran across a lead that has lead me to post here.

The lead is a multifamily in the northern Boston MA area with good potential as a condo conversion. The issue is that the numbers make sense for a 3+ condo conversion, and the house is zoned 2 family. From looking over the area, talking to the owner, and town, it looks like the town would approve 3+ units, but of course, no one can make guarantees until going through the zoning board of appeals process.

This is typical of several leads I get. The owner prices the property based on what they "think" can be built on the property. The deal is good if this is true, but nothing can be guaranteed until going through the rezoning processes, and the process costs money for plot plans and possibly architectural drawings.

Back to the lead above. I've decided that I want to attempt the rezoning process and condo conversion on this property; I have no personal experience in these areas. The reason for going through the process is twofold 1] Learn the rezoning process, and see if there is a low risk way to apply this to other leads. 2] Try a rehab, and see the process through form start to finish. 

My goal in this post is to update the status of this deal and have others give their opinions. So, here were go:

The plan is to first get the property under contract, with a 14 day inspection contingency, and then to draw up a purchase and sale contract with a lawyer; certain amounts of earnest money would be put down after milestones are met in the rezoning process (this was recommended in other posts). Finally, either follow through with the rehab, or sell the plans.

I'm in the processes of agreeing on a offer which should come back tomorrow.

Some of the gaps right now are:

1] Should I partner, hire a GC, or find my own subs? I'm leaning towards partnering. Feel free to PM me if you want to discuss.

2] How to proceed with the inspection period: I made, what I think is, a conservative estimate on rehab, but would like to get a professional opinion. Should I hire an inspector/contractor, have some GCs look (possibly pay them) look over the job, or immediately look for a partner?

3] How to get plot plans and drawings for the rezoning process? pay out of pocket to a professional, look for architecture students on craigslist, etc., or again partner with an architect.? Right now, it looks like I'll have to pay out of pocket.

Enough for today. I welcome any feedback. Thanks.

[Ray Hurteau]

Hey Christian,

Feel free to shoot me an email, but we are essentially doing this right now in South Boston.  We could only agree to the seller's purchase price if the city would approve the plans.  We put the property under contract and made the contingency set upon getting all required approvals (from the city zoning, BRA design, and ability to get demo permit).  This process began in July last year and we've yet to get full approval.  Should hopefully have it by the end of the year.

As far as who does the plans, you will be going through a lot of pain in my opinion if you attempt to skimp on professional services.  Our architect plans and attorney fees will likely end up around 20k believe it or not.  But this is because we have to demo a house and build brand new in order for the deal to make sense (increasing occupancy from 1 to 2 units).

Don't let any seller tell you what they think can be done.  Our seller was under the impression you could waltz right into 1010 Mass Ave and get all the permits in a few weeks.  Yea... right!  Educate your seller that changing occupancy can add value, but unless they are willing to do the legwork themselves, the value of the property is worth what it is right now, not what it could be.

Of course, you can dangle the carrot and offer closer to what they are seeking, fully contingent on the approval process.  Let them know that if they hold out for a little bit, it could really be worth their wait while you do all the hard work and front the money - it's a no risk offer to them - it's not their money!

Now before you go out doing this, let's circle back to professional services again.  Find out who is representing the most clients at the city zoning meetings.  That's what we did.  Hired the architect and zoning attorney who was getting things through.  It will be more expensive, but they know the process, know the people, and most importantly, know what can be approved BEFORE you sign any agreements with the seller and risk your money.  So first, find the talent (is this in Boston proper, or north of Boston?) who can help you determine ZBA approval odds, then start to tie up the property.

If the numbers make sense, we might be interested in partnering or there are potentially plenty of others.  It should be someone who has worked in that town/city before and knows the zoning laws, is friendly with inspectors, etc.  This is not an easy task, especially in Boston where demand for work is high and the good talent is either busy or doing their own projects.

Again, feel free to email me and we could see if it's something we're interested in or if we can offer additional guidance.  Hope this helps!