Condo conversion for refinancing purposes?

[Mike Abramowitz]

Let me start with I am currently in Boston area where a 3 family home costs 1-1.5M on average. I am curious if I were to convert a 3 family home into condos would I be able to refinance each condo to get 75% LTV and in turn pull more money out of my home? (Max loan amounts on 3 family, at least in my area, is about 650K, so it would free up another 200K potentially) I'm aware costs to do this definitely are something to consider too.... But does anyone know Does the property tax remain the same as it would for the whole house just proportionally divided?

[Upen Patel]

@Mike Abramowitz Your 3 family currently is one tax entity. If you where to split it into individual condo's then each condo would be its own tax entity. If you leave in one condo, then you can refi that one as owner occupy. The other two condo's would be investment properties.

In terms of the taxes, it would depend on how the county/city views the new condos and what the comps are. I would think taxes are going to go up. Its only logical. You are wanting to get more value, why would the county/city.

Before you do anything, keep in mind that your current loan will be recalled immediately, if you do a condo conversion as the asset that they have a lien against as changed. Better have your finances in order and refi's ready. Else you might end up loosing it all.

One last point, condo conversion is great but be sure that it fits in the neighborhood. You don't want to do a conversion and then loose value.

[Mike Hurney]

@Mike Abramowitz

No, you may have trouble financing if you own all the units yourself. I'm not sure why you'd convert this 3 family to condos and not sell them...

No, they'd revalue the property.

[Mike Abramowitz]

@Mike Hurney I figured getting new financing would be an issue if you were to go through with it, but my logic behind it was for a traditional mortgage there is the $650k limit on 3 families, where the single family limit is higher. (Therefore allowing you to pull more capital out.) 

Basically, I was trying to think of some creative ways to pull more money out of a multifamily in the area that would asses at $1M, when I have almost 40% equity. I didn't think it would be logical but it at the very least an interesting idea or alternative way to BRRR in an area like Boston with competitive housing prices and no deals to be easily found.

[Mike Hurney]

Hey @Mike Abramowitz check the HUD guidelines for financing all three condos with only one owner.