We live in a 4 unit building that is currently apartments in NYC.
The owner would like to convert to condo, but apparently this is a very tricky and expensive thing to do in NYC with tenants in place. If he is able to do this we would like to buy ours and possibly another of the units.
Does anyone have any experience with this? Apparently the best way is for each of the four tenants to remain in their respective apt and each of us buys our individual unit, which is a possiblility. Otherwise the owner has to vacate the whole building to convert to condos, which seems bizarre and is certainly impractical.
Any ideas would be much appreciated....thanks!
I don't see why this can't be done. It would be a standard condo conversion (though I'm not sure if it is procedurally any different in NYC than in other places).
Before considering the occupants of the building. The owner would need to hire an civil engineer and real estate attorney (google "condo conversion attorney") to get this process started.
The civil engineer would be in charge of designing a condo map and the lawyer would be responsible for the CC&R and legal docs. You'll also have to form an HOA and farm this out to a property management company.
All this entitlement can be done while the building is occupied.
Once all this is done, then you can decide what to do with the tenants. Owner has a few options: (1) can sell to each tenant, (2) rent to each tenant, or (3) vacate the property and put the condos on the open market
This isn't a quick and easy process however it can be done and could be a profitable exit for the apartment owner.
The answer above is very accurate as far as the process. But I can say from experience that in NYC it is tremendously challenging and expensive (for the landlord) as legislation was passed at the state level in New York a few years ago, and then enhanced even further in the city specifically.
1) 60% (or 51%? don't remember) of current tenants must agree to purchase their unit.
2) The price will be high, because the landlord is going to factor in the costs of the condo-conversion (it will cost the landlord 100-300k for a smaller building).
3) The landlord cannot vacate the building to convert to condos. Not anymore, and in your case it may pose a real problem. There is a percentage of vacancy limitation for the preceding 12 months (or 24 months?) from the date of application for the conversion. See, the landlord has to apply to the state's attorney general, and they will look at the occupancy. If more than 10% of the residents were "vacated" during that time, the landlords application will be denied.
So if all 4 of you agree to purchase the condos, other than the time it takes and the expense, it should go smoothly. If 1 of your neighbors does not want to buy, you may have a problem as 1 would equate to 25% of the occupants.
Now all of this is true and accurate from my experience having done this in the city - BUT, I never tried with less than 16 units. It is VERY possible that there are exceptions for buildings of 4 or less units. 4 or less units qualify for FHA mortgages under a federal guideline - so perhaps the prohibitive New York legislation only applies to 5+ units?
This conversion can definitely be done.
One thing to consider-
Just because you may be given an option to buy doesn't mean you'll want to take it. Don't expect any discounts because you've been a rental tenant. What you will likely want to do is compare comps and decide if it's worth actually buying.
Assuming you will buy it because you've lived in there without knowing what the price per square foot will be is a bad assumption.
Thanks for all the ideas...we are reading up on them!
@Maura Paler Did you convert the building into a condo? I'm considering this process in Brooklyn, and I'm trying to understand the process and costs.
We did not, sorry don’t know much about the process
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing