All Forum Posts by: Eric Teran

@Erik Estrada thanks for the questions. 

1. That is what another broker told me. Good to know.

2. My wife and I have five other STR and have been doing them for eight years.

3. I can get an extension but they have another closing cost. Last time it was around $10k so I want to avoid that. The $1.6 is in the middle. Last year it was appraised for $1.8 million but it won't go for that now. 

4. I'm an Architect and did everything. So condos recorded with the city, everything conforms to zoning, and CoO acquired. 

@John O'Leary Thanks for your comment. I know 80% is probably too high but I figured I would ask with the reality that 75% is more likely. The $9k is if the units were unfurnished and rented to one person. If we use STR that goes up to $11k for both units. More likely higher.

Thank you, everyone, for reaching out. It has been helpful, and I'll be in touch. Any other recommendations are greatly appreciated. 

@Jeff Chisum yes we did to divide it into two units. The goal was to sell them so it made more sense to sell each one individually and not the building. 

BP Community,

I've been working with two brokers for the last four weeks on a DSCR loan, but I still have nothing to show. Long story short:

1. My wife and I bought a property under an LLC. We converted a single-family residence into two condos.

2. We put the condos for sale this year and have had little to no interest. We decided to pivot and refinance the hard money construction loan with 13% interest. We removed the listing a month ago. I learned that trying to get financing after listing a property is hard to do. 

3. The two units together should appraise between $1.6 to $1.7 million. 

4. We will rent the bottom unit short-term and the upper unit rent per bedroom for medium to long-term stays. Both will be furnished. We should get around $12k per month. However, the market rate is lower, around $9k together. 

4. The outstanding loan is around $1.2 million

5. Our credit scores are not good since we ran up the credit card to finish construction and furnish these units. My wife is around 700 depending on the credit reporting agency used. Mine is worse in the mid-600s. 

6. In a perfect world, we get an LTV of 80% with an interest rate under 8%. Obviously, the lower the better.

7. Our hard money loan matures in the middle of June. We want the DSCR loan to close before then.

If there is someone who thinks they can help, please message me ASAP. If someone has any other ideas please let me know. 

I appreciate the advice,

Eric

@Gladys Johnson 

I'm an Architect in the DC area and would be happy to help. I look forward to hearing from you. 

I hit the reply button before typing anything. Anyway, the RF-1 zone requires a completely separate unit. This is significantly more than an ADU. The new unit will need the following: Fire sprinklers, separate electrical meter, separate heating/cooling, 1-HR fire separation between units, own exterior door, no interior connection to the upper unit, egress windows for the bedrooms, and a minimum 7' ceiling height. Once construction is done a certificate of occupancy is required. In DC this type of project for a new investor is around $125k to $200k. There are a lot of things that will affect the cost. The biggest one is if you have to drop the slab to obtain the ceiling height. The great news if you can afford it the new unit can become its own unit and you sent rent or sell it off independently of the other unit. This is a condo conversion. Good luck and let me know if you have any other questions.

@Lydia Lorraine does your client have an Architect? They should be able to tell them how much they can build by right and through board approvals. The BOZ is the Bethesda Overlay Zone which mainly governs the development of the Bethesda Downtown Plan as it relates to density, heights, affordable housing, parks, and design. The density has been capped at 32.4 million gross feet for development. Each project that is built in this district has to be subtracted from the 32.4 million gross feet. Here is a link from Montgomery County. There are a few ways to build more than what is allowed by right in BOZ. 

1. Affordable housing will increase the FAR. The total affordable units are based on a percentage of the total units and they have to be disbursed equally throughout the building (they can't all be in the basement). Sometimes there is a minimum amount of units that are required but if additional units are built then more credit may be given.

2. An owner may also ask to exceed the FAR but is required to obtain approval from the board. If they ask this there should be a good reason and hopefully, other cases that have already been approved in the area with similar circumstances. 

3. Another option is if an owner owns multiple lots. If one lot is used for the public such as a park or public art then the gross floor area for that property may be transferred to another property within the Bethesda Downton Plan.

As you can see there are many ways to get more than what is allowed by right. Most likely asking for more will add 4-10 months to the approval process as the board will have to approve it and I'm sure there is some back and forth between parties before an agreement is reached. 

If you provide an address I can give you more detailed responses. If you have more questions feel free to contact me. 

Good Luck.

@Emilio Pereira I’m going to give you the worst case scenario as I am an architect and this has happened to my clients. Once you enclose the space and make it habitable you need to add mechanical and electrical components to the space. You  also have to add insulation to the walls and roof. There is no attic so you most likely have to use close cell insulation in the ceiling. This is costly and other options will lower the ceiling height. Also, windows will have to be brought up to code. I can’t tell if the side wall is all windows but this will not pass for shear wall requirements if changed to habitable space.

The biggest cost may be the foundation. A foundation for a screen porch or what may have been a carport is not the same as habitable space. Depending where you are in the country your footing has to be a certain depth. For example, I’m in the DC area and footings are required to be 30” below grade. If this only has a 12” footing then the footing has to be extended 18” to be 30” from grade. You can underpin or demo and rebuild but either option may become expensive. 
We don’t know when this was built but most likely the building codes are new and this won’t hold up if you make it an interior space to be part of the house. Once again, I’m giving you a worst case scenario but these are the questions you need to ask. A contractor will not know this because it isn’t their job to know this. I know this as an Architect who has 20 years of experience and numerous clients who are developers that always try to do something similar. I’ve learned through experience.

So you may not need an architect but be careful if a contractor promises you that it is easy. What you should do …. What you need to do is go to the municipality and ask them what is required to convert this space into an interior space. Make a list of all the items I mentioned and ask them directly as many city employees only answer yes and no. At the very end ask them is there anything else I should know. At this point you will know what you need. 
Good luck. 

@Mark Urich I agree with @Matthew Sprott to find a draftsman or someone right out of school. As an Architect I would charge you much more. There is an app called Canvas.io that can be Downloaded to an iPad or iPhone (they need the latest cameras) and you can scan each unit. Once the scan is complete it is sent to them. Within 2-3 days they will return a file that even has the baseboards, all the light switches and outlets, and all the cabinetry. We use it for my office when we work on an existing building. Once you get the file back you can ask anyone that knows Autocad or Revit to put each unit on a sheet and add any information you may need like room names or dimensions. If there are a lot of units this is the way to go.

Good luck m,

Eric