All Forum Posts by: Travis Ferree

@Jared W Smith

I couldn't agree with you more. I was over trusting of what my GC was telling me, and he was stating that he was in constant communication with code enforcement. Either way, the lesson learned that I need to be involved in communications with CE either before closing, or as soon as possible after.

No, my PE isnt attempting to persuade them I was just outlining that up until she became involved, they were standing by their statement that they were no longer contesting the occupancy.

Regarding documentation, everything we have states that it's a 4-unit. I had our closing attorney review everything again to verify that nothing was missed. As said before, the property is 100 years old, and certificates of occupancy are never used on properties of that age so I'm confused as to why now it's what they are using to contest the occupancy?

@Ken Bailey

If made into the 3 unit there will be a 1 bedroom (app. 550sq.ft.) , 2 bedroom (app.800sq.ft.) , 3 bedroom (app. 1200sq.ft.)

Hey BP!

I'll preface my post with this…Yes, we’re actively seeking legal counsel but the forum seemed like a great way to get additional input. Not knowing if this situation will require litigation, I’ve intentionally withheld the specific area this property is located in.

My wife and I (myself acting as buyer's agent) purchased what was advertised as a 3 story / 4-unit property in the state of NY with the intent to BRRR with a hard money loan. This property is listed as "411 – Apartments" which by definition means be 4 units or greater. This fact has been confirmed 3 times with both the Assessor's and Real property offices. I also have an email from the code enforcer about a month after the purchase stating "I have not found substantial evidence to contest the buildings current occupancy as a 4-unit dwelling. The renovation/alteration of the house does need to be designed by an engineer or architect in compliance with the Existing Building Code".

After receiving a stop work letter during demolition, and realizing that my GC made an oversight on the level of drawings required for the level of renovations we needed to perform, we hired a local design/PE company to complete the structural, electrical, plumbing, fire, and energy efficiency as required by code enforcement. Since the design company has been in talks with code enforcement, they have now rescinded their prior statement of not contesting the 4-unit occupancy status and state that they do no have a certificate of occupancy for a 4 unit (CoO aren't commonly used in this area). They are also not recognizing the 3rd floor as ever being approved for occupitable space which is now considered an addition, forcing us to bring the property into compliance with the International Building Code not the Existing building code as stated in the email. This new information would require the property to have a fire suppression system, as well as a paved parking lot with a combined cost of ~$45,000 which no longer makes the property BRRRR friendly.

Options we've developed:

1) Make the property into a 3 unit- Using a mezzanine clause in the code we can utilize 1/3 of the 3rd floor's square footage, mezzanine it to the 2nd floor, and it will be consider 2nd floor. This option will allow for a 3 bedroom/2 bathroom unit and avoids the ~$45k in upgrades but will most likely cause the total rent roll for the property to be ~$200 less than projected as a 4 unit. This option also impacts the refinance as the property will now have comparable sales with other 3 units. 

2) Install the fire suppression system and parking lot with the hopes that the property will appraise for the additional amount so the refinance will cover the additional costs. Based on my comps when purchasing this property this is highly unlikely but we would hire an appraisal company to verify this option prior.

Any help that anyone can provide is greatly appreciated. 

Travis

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Painted Post.

Purchase price: $106,000
Cash invested: $12,000

Side by Side Duplex with 3 beds and 1 bath in each unit, in a B grade neighborhood.

What made you interested in investing in this type of deal?

Fiancee and I were living with my parents...need I say more? LOL

Biggerpockets was a giant contributor to taking this small leap into rental property.

How did you find this deal and how did you negotiate it?

MLS

How did you finance this deal?

Local Bank - First Time Home Buyer

How did you add value to the deal?

I'm personally handy around houses so I used ~$6,000 and some elbow grease to repair a water damaged garage (posts, sheathing, shingles, exterior paint), upgrade to vinyl windows(entry level), painted every wall, removed nicely perfumed carpet and refurbished hardwood floors, replaced kitchen counters and appliances, installed heating duct to 2nd floor. ~2 years later insulated attic with blown in.

What was the outcome?

Rent increased from $800 to $1000 monthly

Lessons learned? Challenges?

The unit's appeal will determine the type of tenant willing to rent