Is this a good deal in Berkley CA?

Question

Condo conversion address 1613 6th St Berkley CA

7 unit apartment complex sell price is 1.52M

six units are 2 bed / 1 bath

one is a 3 bed / 1 bath

all units have their separate gas and water meters and parking space, there is even a common space available set up in the complex.

Condo compatibles are $400,000 plus

Even without the conversion I am told the rent are $135,000 per year cash flow.

After talking to the planner at the city, most of the conditions have already been met by this particular property.

It will mostly be paperwork to convert and put in place an HOA. There is a lawyer with a lot of experience that offers to do this for a flat fee of $10,000.

Mike Hurney · Answer

@Aaron Montague I thought Brookline was a little tougher?

Matt Theriault · Answer

There's a lot of great comments and suggestions here, and they should all be taken into consideration. However, to answer your question "Is this a good deal?" It can't be answered with the information that you've provided.

A line of questioning that would serve you better might be…

1. Considering the effort and resources involved, what's the minimum I'd like to make off this deal?

2. Will this deal get me my minimum?

If the answer to the second question is "Yes," then it's a good deal for you.

First define what a good deal is to you, and then look for a deal that fits your definition. Doing this in the opposite order significantly increases your risk.

Hope that helps. Good luck.

Mike Hurney · Answer

@Aaron Montague yes and with a good team (if it's feasible, no current Tenants) it shouldn't take long or cost much money.

Arron Sweeney · Answer

@Sal Jimenez

Excellent advice so far.  The Bay Area has some of the most stringent tenant right laws in the country.  You will have to buy these tenants out in order to make it work.  Depending on the leases this may not make the deal worth it for you.  Feel free to contact me if you have questions or are looking for other opportunities.

Aaron Montague · Answer

@Mike Hurney I have no clue about converting in Brookline.  Brookline is so expensive to buy, I really only look out of amusement.  I know Woburn, MA has rules similar to Boston.  It seems to be a "so long as we get the taxes, you can do whatever" mentality.  Have you done a condo conversion in the Boston area?

J. Martin · Answer

Michaela had a good link for rent control ordinance (and has a foothold in the Bay). Here's a plethora from the planning dept regarding their thoughts on housing and changing units. Scroll down if you get bored with their background/reasoning. City goals regarding housing are at the bottom. Being great friends with high-up officials doesn't hurt either on a project like this!..

http://www.ci.berkeley.ca.us/contentdisplay.aspx?id=1986

J. Martin · Answer

Michaela is right to caution you about the tenants - especially about tenants rights regarding eviction rather than rent control. Presumably you are trying to take rent control units off market. Berkeley does not like that.    Look up 'just cause eviction' , 'Ellis Act' , and be familiar with the logistics of the condo conversion process in Berkeley. I've seen $15-30k plus per unit for tenant buyouts in SF and Berkeley. Also look up 'protected tenants' and determine if you have any. They have extra special rights in this area. Have a great - not good - lawyer. Or it could cost you very dearly. Mistreating tenants in Berkeley can come with BIG consequences and future commitments. You also need to consider if they will force you to sell a unit below market rate (BMR). Good luck, and be careful!!

Michaela G. · Answer

Berkeley has rent control, so it may cost you a pretty penny to get the tenants out. I know that I would not want to consider doing this in San Francisco, but I don't know how the rent control in Berkley is different

http://www.ci.berkeley.ca.us/Rent_Stabilization_Board/Home/Guide_to_Rent_Control.aspx

Aaron Montague · Answer

I have no clue how complicated the conversion laws are in the town you are working in, but here in Boston, converting condos is a few pieces of paperwork with the city.  Lawyers generally ask $3500 per unit out this way.

Shaun Reilly · Answer

Is the place currently rented?

If so I'd look into what it takes to get them out for the conversion.

I don't know what you need to do in CA for that, but I do recall hearing various "horror" stories about being able to do something like this in an occupied building.  I know that can vary from city to city, but I'll go out on a limb that Berkley won't be a place that will be easier than normal...

Is this a good deal in Berkley CA?

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