Greetings BP Fam,
I have a prospect looking to sell a multifamily in NE DC, 1300 block of Bryant street. 4 units, 1 bed/1 bath each. Seller wants approximately 600k. From my limited knowledge of the DC market I think this may be a deal worth pursuing. I have found that as is sales in the area are around the seller's asking price. ARVs for condos are approximately 300k for 2bed/1bath. Thus I concluded that the ARV of subject would be 1.2 mil by adding an additional bedroom. My questions.
1. How to calculate repair/construction costs to do condo conversions? Primarily speaking of permits, architectural drawings, any other special assessments/fees that need to be considered.
2. Is my math accurate thus far?
3. All units are tenant occupied. I know in Baltimore City, you have to provide tenant an opportunity to purchase property before selling to anyone else. What are the laws regarding this issue in DC?
@Eric H. You are going to want to get up to speed on the DC Tenant Opportunity to Purchase Act (TOPA) ... you will absolutely hate this scheme. Let's just say it has delayed, derailed, ruined many deals. Be prepared to have a tenant association take your deal, or at least screw it up, hold it hostage and take a ransom.
TOPA= Legalized Extortion.
You will also want to look into the condo conversion tax. The amount varies if the condos are sold in underna year verses over a year.
I am renovating a 4 unit right now in DC, and will be renovating another shortly. We've found that the buildings generally need all new electrical, plumbing, HVAC, roof, and all finishes (total gut). Everything is 80 year old wiring and galvanized steel plumbing. A complete renovation to condo quality is about 450-500k. Condo conversion legal fees are about 15k, architect/design fees 25k. Then there is also a 5% tax on the outsale of all condo units which have been vacant for less than a year, and realtor commission. In Trinidad at least, 2/1 condo units are going for 300-350k. So for 4, probably about 1.3 million. TOPA and vacancy cash for keys are another expense as well. Hope that helps! Good luck.
Another consideration is basement dig out potential and poptop potential, which can get your cost per condo unit down (because you've already paid for the land).