I have a property under contract, which is 4 condos, all in the same building, as separately deeded units. This building is the only set of condos that was developed in the late 80s. Later on, the developer took the rest of the land and built single family homes around it.
The condo HOA has been folded into the neighborhood HOA. The condo building is under a separate maintenance requirement to be administered and handled by the owners of the condos.
I know everyone looks to split up a MF building like this into condos, but it is actually making the process of purchasing the units more difficult, because we would own 100% of the complex. Would it make sense to attempt to convert the building into a quad-plex? It is unlikely that this building would ever be sold off into individual units, primarily because small condo associations are very uncommon in NC, and it is really out of place around the other SFHs.
What is everyone’s thoughts on this?
So the short of it is, yes it can be done. There are actually stories on this being a 'hostile takeover' model in some areas where the value is greater in an apartment project, or to allow re-development.
Now the longer questions....why is the separate units making it harder to purchase? Something that I try to note with clients sometimes is, 'legal' separate lot status, 'mapped' lot status, and 'tax assessment' status are all different and applied in different situations. I believe (I'll let a loan guy respond here) that the requirement for a conventional loan is just that it needs to be 4 units or less on a single 'tax ID' meaning that having mapped or legal lots greater than one is ok for the loan. Proof of this is buying a home with an 'extra' lot next door. That vacant parcel would be an example of both a mapped and legal lot, but because they are conveyed on a single deed that is a single 'tax id'. Here at least it would be a simple matter of going to the assessor and requesting the tax parcels be merged....which would not in any way change the nature of either the mapped or legal lot status.
@Matt Devincenzo thanks for the response. From what we are finding, some lenders are uncomfortable with one entity owning more than 20% of an association. In our case, we would actually own 100% of the association. However, we are finding that local banks which don’t package and securitize their loans are more comfortable with it. I believe that will be the process we will have to take, and most likely won’t ever sell the individual condos.