Condo Conversation Peohwct

[Lucas Vanroboys]

Hi everyone,

I wanted to bring this internal debate I'm having with my self over my next project to the BP community and open it up for advice, recommendation, thoughts and comments.

So I am currently under contract with inspection and mortgage contingencies at a very good price for a 3 family property in Uphams Corner (for those familiar with the Boston area). That price is $910k.

My original plan was to do a condo conversion in 3 seperate condo which are currently have comps at $550k-$600k (~$1.7 mil - $1.8 mil ARV). The property is actually in pretty good shape overall and the rehab budget to do this, which has been quoted by 2 GC is $500k conservatively.

So if I'm all in at ~$1.4 mil and can sell the 3 higher end condos at a total of $1.7 mil at first glance that margin is something that's appealing to me.

the debate I'm having with myself is mainly around the current healthy of the condo market and what the resale prices would be in ~8 months from now. The margin does start to slip if condo prices slip or execution is poor. 

Another option would be to renovate to rental grade, BRRRR out of it at an ARV of ~$1.3 mil and put the condo conversation on the back burner as an exit when the market turns back.

Obviously the first one would be great if it works well and markets hold or improve slightly, but this being my first larger scale Flip elevates the execution risk, let alone the market risk which is why I am hesitating and consider the more conservative option #2. 

Any advice, opinions, thoughts and comments would be greatly appreciated. If anyone has experience converting multi into condos in the Boston area or anywhere really, I'd also love to connect!

[Matthew Crivelli]

Quote from @Lucas Vanroboys:

Hi everyone,

I wanted to bring this internal debate I'm having with my self over my next project to the BP community and open it up for advice, recommendation, thoughts and comments.

So I am currently under contract with inspection and mortgage contingencies at a very good price for a 3 family property in Uphams Corner (for those familiar with the Boston area). That price is $910k.

My original plan was to do a condo conversion in 3 seperate condo which are currently have comps at $550k-$600k (~$1.7 mil - $1.8 mil ARV). The property is actually in pretty good shape overall and the rehab budget to do this, which has been quoted by 2 GC is $500k conservatively.

So if I'm all in at ~$1.4 mil and can sell the 3 higher end condos at a total of $1.7 mil at first glance that margin is something that's appealing to me.

the debate I'm having with myself is mainly around the current healthy of the condo market and what the resale prices would be in ~8 months from now. The margin does start to slip if condo prices slip or execution is poor. 

Another option would be to renovate to rental grade, BRRRR out of it at an ARV of ~$1.3 mil and put the condo conversation on the back burner as an exit when the market turns back.

Obviously the first one would be great if it works well and markets hold or improve slightly, but this being my first larger scale Flip elevates the execution risk, let alone the market risk which is why I am hesitating and consider the more conservative option #2. 

Any advice, opinions, thoughts and comments would be greatly appreciated. If anyone has experience converting multi into condos in the Boston area or anywhere really, I'd also love to connect!

How much rehab are you projecting if you keep the property as a 3 family?

The numbers look a little tight on the condo conversion. If the contractor is telling you 500k I would be adding at least a 10% contingency to that figure. You have to factor holding costs too. Budget for a 12 month flip as this is heavy rehab. 

910k Purchase Price + 550k Rehab + 100k Estimated Property expenses and holding costs totals -  $1.56 Million (not even accounting for the cost to sell the condos on the back end)

Total Cost $1,560,000 / (ARV) $1,750,000 = 89.14% cost to ARV

Without paying anything to sell the properties on the backend, you have a projected profit of about 11%. 

To me, this is not a good project to get into. High chance you walk away with little to nothing. The numbers are don't pan out.