All Forum Posts by: Dan K.

@Ricky Beliveau -- good point about condo conversion and taxes. My suggestion of going through the legal process was prepping for sale. There are investors in the area who have a strategy of prepping housing for redevelopment but then sell without doing the actual work. You can convert to condos, hire and architect and get all of the city approvals, and then sell the property to a developer that is ready to put a shovel in the ground.

Hi @Alejandro B.,

As @Ricky Beliveau said, that area might be a bit early for a large scale redevelopment to convert from rental grade to condo grade. That being said, you can go through the legal process of converting the property to condos. You will retain ownership of the three units, but completing the conversion to condos will help make the property more appealing to future buyers. Of course if you plan to hold the property for many years, positioning the property for a sale does not make sense.

I'm not sure exactly what you're looking for, but I have worked with architects and structural engineers in Boston/Cambridge. The engineer I've worked with is great for smaller jobs (of course he can also do large projects).

Hi @Thomas Phu,

There are plenty of ways to create a win-win.

1) Purchase from brother in-law, complete reno and sell

2) Purchase brother in-law's interest subject to the mortgage. You pay the mortgage, renovate, sell and pay back bank and brother in-law's notes

3) Sell as is. You might be surprised at what you can get with permits in place.

4) You can also do a BRRRR, redevelop the property, turn it into condos, etc. You have many, many options.

The first thing you need to figure out is what will make your brother in-law view the investment as a "win?" He might for example just feel like at this point getting his money out is a win.

Hi @Zarah Castro, welcome to BP.

I know you're looking for a short and simple answer, but unfortunately what's you've heard is correct -- you might need to mostly rip it out, it could be fine, or it could be grandfathered.

When it comes to basements, there are specific concerns regarding egress. You must have some sort of secondary egress if there is a living quarters -- either a door or an egress window.

There is pretty standard wording in P&S agreements that all work has been properly permitted.

If this is a rental property and the basement is rented out as a separate unit I would encourage you to be cautious. Towns and cities in the Boston area tend to have a high level of scrutiny when it comes to basement rentals. There is a long history of people creating "illegal" basement apartments. Boston and other municipalities have been updating their zoning regs regarding basement units, but because of flood, fire, carbon monoxide, and egress issues, there are many potential pitfalls.

Hi @Josh Longtin -- I agree with what @Charlie MacPherson said. However, if the property has an unfinished basement, attic, or expansion potential, increasing the septic could be a huge value-add since you have to do the work anyway. A 3 bedroom house that already had a septic tank approved for a 5 bedroom will be very enticing. 

My opinion is that if you're taking multiple application fees for a single property, you should expect confused, frustrated and sometimes angry prospective tenants who you don't choose. It's completely understandable for them to be frustrated.

This is probably a longer answer than you were expecting.

I would protect yourself in the following ways:

1. In the application, have the applicant initial a section where you explain that you adhere to all federal and state fair housing laws, but that decisions regarding tenancy are complex and involve a combination of multiple factors including, income, anticipated tenancy, etc., etc. Applicant understands that they may not be offered tenancy.

2. You should have a form letter that you send out that says somebody was rejected. The decision is difficult and relies on multiple factors including XYZ. At no times is (LIST OF PROTECTED CLASSES) part of your evaluation.

3. As you scale you should develop some floor requirements. You won't rent to undergraduate students (not a protected class), you won't rent to people with income of less than 3x the rent, you won't rent to anybody with certain animals, you won't rent to somebody with XYZ on their credit report. Other examples include: smoking, credit score range, criminal history, eviction history, references.

4. When you reject somebody that has paid the application fee, keep their rejected application in a file and make a quick note of why you rejected them. This note could help if there is ever a lawsuit. You can easily say you rejected prospect C because prospect B had a better credit report and a higher paying job.

Basically you want to make it clear that you evaluate all applicants on the same set of criteria. You need to make sure nobody receives special treatment.

If you are presenting this to wholesale buyers, I think it would be prudent to position the property as a buy & hold or a flip. Additionally, as Frank mentioned, you are missing some expenses. 

Furthermore, most buyers will either sell or refinance, so the numbers don't really match reality.

And of course, ARV, expected rent and rehab costs are always a concern. Do you have any sort comps to backup those figures?

As @Lien Vuong said, you need to underwrite this deal as if you're a bank.

In addition, how much equity is the buyer going to have? If the buyer is doing 100% financing, there is very little "meat left on the bone" if the first mortgagee forecloses on the property.

There are a few things to keep in mind. Your attorney will help you with the following:

- Closing documents (purchase and sale, deed, etc)

- Recording and courier fees

- Title search

- Title insurance

It is a good idea for your cousin to have their own attorney to review the materials.