Converting MF to Condos? Improve/Hold? Pro/Con?

[Jack Tucker]

I'm looking at an off-market 10-unit MF building in a great part of town. There's heavy appreciation upside to the property but I'm considering highest and best use, plus exit strategy. There's a very possible demand if we turned this MF building into a condo...

Is this a question for the city planning dept? Pros and Cons? Residual income from Condo Association? Any watch-outs or requirements?

Maybe one option would be to upgrade, get the enhanced rents and hold, then convert when we are ready to finally divest down the road?

Basics: The units were just recently individually metered for power and water. Sandwiched between growing medical school, regional hospital and growing business district. There are literally 3 MF zoned properties in this entire section of the city - which is very low compared to demand! No new MF rezoning inside the city will be permitted for the foreseeable future. Existing zoning allows for both Condos as well as Apartment buildings.

10 relatively large units of 1 bed / 1 bath, with current rents at $475 ea plus own utilities. This is below market rent because building needs upgrades (it's a "C" building in an "A-" neighborhood). Current owners can't agree on a go-forward strategy, so will just dissolve their partnership and sell to me. :) With $100-150k of upgrades, could pull $650-$850 of rent each. Obvious forced appreciation, but also looking at what is highest and best use. Premium 1-bed housing is sparse in this area. 1 bedroom SFR unavailable. 1 bedroom condos do not exist within 15 min drive.

Thoughts? Also, I got the down payment and basic upgrades under control, as well as financing the purchase price but what's the best way to get a bigger chunk $150k of rehab money to go all the way on this commercial opportunity? Thanks in advance!