All Forum Posts by: John Brinkos

Although the listing agent/owner should help with those answers it would be wise to do the back research yourself. You can't get some of the information yourself and must rely on their information but there is a significant amount of cross checks that can, and should, be done to verify the information and make sure you are not being "snowed." I point it out because I just dealt with this on a small multi property purchase and should have caught a couple issues. Some of the rents that were previously claimed we not accurate and I could have caught that by doing some market comps on trulia, Zillow, rent-o-meter or whatever site you want to use. Also, the taxes were off by hundreds of dollars and I cold have verified that on the city website. That was exacerbated by the fact that the city reassessed after the purchase and adjusted the taxes higher based on the new purchase price. Luckily I am still cash flowing well and these mistakes are not biting me but they could have resulted in a very bad deal. Bottom line, although the agent and seller are sources of information if you don't do your own work then buyer beware...the old saying goes, "No one is ever more concerned about your money then you are so take advice but do your own work."  

I am negotiating a 64 unit C/C-D in the Richmond, VA area. What is the normal Caprate/unit price? Property is on the southeast side right near I-295 south of I-95. I am looking at an ask in the neighborhood of 7.4% which seems very high. Agents telling me that is about right in Richmond but it seem high to me for an unimproved 50 year old property without HVAC or any other upgrades. John

Wanted to update everyone in this post line.  I spent some time with a lawyer this weekend and read over a couple Public Offering Statementa for Virginia.  If you haven't dug through one of these line by line in your area and you ever think about a condo conversion grab one, a highlighter and notepad.  Set an hour or two aside and take some notes.  

As Chris said there are a lot of architectural costs, management costs and ongoing involvement that may come with the conversion that you wouldn't initially expect.  It seems that there is a break even point based on the number of units and the 4 that we were planning just didn't cut the mustard.   The property will stay an 8 plex

Have a great day and keep moving forward looking for the next deal!

Thank you for the incites, 

Chris,

I appreciate the caution and information.  Would the engineer and warrantees come into play in a small 4 unit conversion that is managed by a third party company.  I have heard and I am currently searching for a third party to take over the management of the condo association following sale.  Do you think that would alleviate much of the headache that you refer to?  I have budgeted $20K toward legal for the conversion process and startup of the association in my numbers.  Does that seem like a reasonable number?

Thanks again,

John

Is there anyone in the Hampton Roads (Norfolk/Portsmouth/ Virginia Beach area of Virginia) area that is enjoying success converting small multi's (4-8) or small apartments into lower density condo's?  I am interested in converting a 8-plex into a 4 unit condo with 3/2.5 units in B+/A neighborhood.  The building needs major repairs (150K) and is vacant so it is a prime time to convert to condos in a lower density for a potentially higher cashout after the rehab.  The area is working to reduce density and the project should be welcome by the neighborhood and the city.  

My concerns with the project are

- the time to rezone and approve reconstruction

- my ignorance in the process to rezone

- the structure for the condo management after the sale

- I saw, what seemed like, many start and fester or fail in the HR area a few years back so I am very cautious at this point.

The numbers and the project look very solid even offering the investors 25% returns if I can finish it out and start selling in 10 months but I am not sure that is possible with the rezoning even though it is reducing the density in the area.

Any feedback or insight is welcome,

John

There is another issue that may or may not show.   Was the property properly permitted for the conversion and is it zoned for the 5 units?  Are you going to run into significant permit headaches when you go try to pull permits to do the work in the future?  Be careful on the big house conversions they can burn you when you have to sacrifice a unit to rehab the property.  It is not always grandfathered.

The number of loans will depend on the type of financing you are pursuing and whether or not the bank will sell the loan on a secondary market (Fannie/Freddie).  Have you talked to any bankers/broker in your area so you understand their needs?

I live in NoVa also and I understand the price challenge.  Richmond may seem smart.  In a lower cost area you can spread your risk over more property rather then a few in NoVa but it is a difficult commute.   I assume you would turn over management to a local prop manager and build a team in that area.  

Why limit yourself to Richmond if that is the case?  There is the same challenge if you were 3 or 4 hrs (Pittsburgh, Philadelphia, Hampton Roads or any other multitude of locations) the investment of time and energy is extensive to get to a remote location, even geographically close like Richmond because of our traffic, regularly.  The first step, with all that said, should be to building a team in the area of your choice so your time is well spent.

It seems like this ties back to establishing relationships.  We are all in business and it cost time and money to give an estimate.   After you have worked with them on a deal or two and solidified the relationship it should get easier...and cheaper.

Hey all, great to be here. I am a transitioning career navy guy. Moving from nuclear power to providing quality housing for families. I've been dabbling for about 13 years now and its time to get serious. I appreciate all the advice that those with insight provide and just hope I can learn and help. I am currently concentrating my efforts in Hampton Roads VA. My focus is small multi repositioning and SFH rehab and holds

John