Purchasing Quadplex in LA; possibly will convert to 6 units

10 Replies

In Los Angeles

Listing price $690k. I have offered $645k. 

It currently has 2 2bed/1ba and 2 5bed/2ba. 

The property was non comforming 6 units and the seller just converted and remodelled it to 4 units.  I may convert it back to 6 units; 4 2bed/1ba, 2 1bed/1ba; but the conversion would be non conforming so there are risks related holding the property like that. I plan to hold long term. Conversion costs would only be about 20k. 

I dont know market rent for the 5 bed units because they are an oddity. My range guess is 1900-2200. The 2beds will go for 1150-1300, and the 1beds for 800-950.

The seller acquired the building by auction and doesnt have any expense history or rental history. All units are currently vacant. 

I plan to put 25% down $172k on full asking, with a monthly payment of $2700.

Thoughts? Opinions?

Thanks

How good is the location in LA? Near tourist locations? Close to any good spots?

What do comparable buildings go for?

When you say "non conforming" is this legal non conforming or illegal (ie not permitted) non conforming? I ask because I have a SFR that is zoned "General commercial w/ non conforming residential use". Meaning it was a built as a SFR and at some point in the past the zoning areas changed to the area being determined to be a "commercial" zoning overlay. As long as it stays a SFR it is allowable, but were I to tear down or the property become destroyed only a commercial use rebuild would be granted most likely.

So now that the units have been converted can they still be converted back legally or have you now "lost" that prior non conforming use? 

Originally posted by @Matt Devincenzo:

When you say "non conforming" is this legal non conforming or illegal (ie not permitted) non conforming? I ask because I have a SFR that is zoned "General commercial w/ non conforming residential use". Meaning it was a built as a SFR and at some point in the past the zoning areas changed to the area being determined to be a "commercial" zoning overlay. As long as it stays a SFR it is allowable, but were I to tear down or the property become destroyed only a commercial use rebuild would be granted most likely.

So now that the units have been converted can they still be converted back legally or have you now "lost" that prior non conforming use? 

@matt devincenzo To be perfectly honest I'm not sure. I left the building and safety department and they told me a lot. They used the term legal non conforming, but that may have been to do with the parking. Why don't I tell you the situation more closely and you can possibly weigh in.

The building was originally 6 units built in 1955. In 199X, the owner converted it to 4 units I believe to qualify for a window replacement credit and to qualify for a conventional loan. He got it permitted. He then after switched it back to 6 units, without permits by choice or not.

It stayed as 6 units until recently when the current seller, a large investment company, bought it at auction. When they tried to sell it they needed a presale report and it was deemed that the property had to be 4 units. The seller tried to get it permitted as 6 but current zoning rules are 2 parking spaces per unit. The old rules were 1 space per unit. There are currently 6 parking spaces which satisfies the permits given when it was converted to 4 units in the 90's. The property is grandfathered in for those parking limits but if it were converted to 6 units now it would need 12 spaces which is not an option.

All at said, do you think in its current state it's legal, non conforming? I think it is.

If I switched it to 6 units it would be illegal, correct? Do you think its a poor choice to do it anyways?

Originally posted by @Douglas Quaid:

How good is the location in LA? Near tourist locations? Close to any good spots?

What do comparable buildings go for?

 It's a lower income and rougher area  of LA but not a war zone.  There is big $ construction developments within 1 mile, one being a $2billion residential and retail development which makes me hope the area will have a surge. 

Hello Zachary,

Have you check the pluming, electric and roof ? Do you have an information for any recent rehab? What city in LA you are referring to ?

Kyle

Aaaah the parking issues, that's a whole other layer to this onion. I work in Civil Engineering down in San Diego and we run into this when clients are looking to do condo conversions or sometimes like what you're talking about.

I think you need to clarify some terms here:

Non-conforming is what you have now. It means it doesn't match, either zoning; or use; or in your case parking. Essentially this is the "legal" term for grandfathered. Grandfathered just identifies that you did "match" at one time then the rule changed, now you don't. This is an important distinction because if you're non-conforming due to an approval of some sort (think more like a variance or a special permit) then it's kind of once approved always approved. With "grandfathered" it's more as long as things stay the same you keep operating on the old rules.

If you do this conversion it will no longer be non-conforming it will be "un-permitted".

When you do un-permitted work you can be req'd to return it to the prior condition, and more importantly when you have to return it you have to meet today's code....and the reason for the lengthy explanation above....if you get caught they can decide that you have to meet today's parking code and as such can now only have 3 units not 4/6.

Not saying that's what would happen, but it's kind of worst case scenario. And there is a very real possibility of it, though admittedly I don't know how LA is on things like this since I don't work in the area.

Originally posted by @Matt Devincenzo:

Aaaah the parking issues, that's a whole other layer to this onion. I work in Civil Engineering down in San Diego and we run into this when clients are looking to do condo conversions or sometimes like what you're talking about.

I think you need to clarify some terms here:

Non-conforming is what you have now. It means it doesn't match, either zoning; or use; or in your case parking. Essentially this is the "legal" term for grandfathered. Grandfathered just identifies that you did "match" at one time then the rule changed, now you don't. This is an important distinction because if you're non-conforming due to an approval of some sort (think more like a variance or a special permit) then it's kind of once approved always approved. With "grandfathered" it's more as long as things stay the same you keep operating on the old rules.

If you do this conversion it will no longer be non-conforming it will be "un-permitted".

When you do un-permitted work you can be req'd to return it to the prior condition, and more importantly when you have to return it you have to meet today's code....and the reason for the lengthy explanation above....if you get caught they can decide that you have to meet today's parking code and as such can now only have 3 units not 4/6.

Not saying that's what would happen, but it's kind of worst case scenario. And there is a very real possibility of it, though admittedly I don't know how LA is on things like this since I don't work in the area.

 Thanks for the clarification. The above I have learned is all accurate. It's a risk, and I am trying to determine if it is worth the risk. That said, the current owners bought it via auction and it was unpermitted 6 units. The city forced them to switch it back to 4 (the amount it was legal non conforming to) They didnt make them bring it up to code which parking-wise would have been 3 units. Id much rather have 6 units given the 5 bedroom units are an issue.

I saw in zoning regulations that I could lease parking if its close by. I am looking into some creative options like that. 

Thanks for the help.

Originally posted by @ Kyle Atans:

Hello Zachary,

Have you check the pluming, electric and roof ? Do you have an information for any recent rehab? What city in LA you are referring to ?

Kyle

 Will do all that during inspection. 

What about renting out the "large" units as vacation rentals or student housing? Could you do something a bit "out of the box" for those units.

Originally posted by @Elizabeth C.:

What about renting out the "large" units as vacation rentals or student housing? Could you do something a bit "out of the box" for those units.

 Not a vacation destination and no big college nearby. It would need to be more traditional family and working tenants.

Get the Ultimate Beginner's Guide

Sign up today to receive the popular eBook for free!