One of the ways to make money in real estate is the condo conversion. The idea is pretty simple, but the execution requires a thought out plan. Hypothetically, say you buy a 3 family home in Boston for $500,000. If you can convert the 3 family into three separate condos and sell each condo for $250,000 that would produce a $750,000 total sale. Under this scenario you would get $250,000 before expenses. Before, jumping into this strategy there are a lot of things that you would need to consider.
First, you would need to make sure the zoning would allow you to convert the 3 family into individual condos. Not every three family can be converted into three separate units. It is important to check with the local ordinances to see if condos would be even possible. You certainly want to know this prior to buying the place. The worst thing is to buy a piece of property and then realizing that your plans are illegal to execute.
Second, the building itself would need to be converted into condos. Unlike a three family, the utilities for condos need to be separated by units and one for common areas. For a three family you could get away with just one furnace, one electrical meter, one water meter, and one hot water heater. For condos you need a furnace, electric meter, hot water heater and water meter for each unit. Then you need a separate reader for the common areas. Some 3 families already have separated units, this is more likely to happen when the 3 family is being rented and the renters pay for their own utilities.
A condo agreement needs to be created then memorialized into condo documents. It is important to have good accurate condo documents because the people living there need to know their rights and responsibilities. Messy condo documents can lead to arguments and law suits. Also bad condo documents can hold up your sale or potential buyers walking away from a deal.
Investigating zoning, construction costs and condo documents are a few costs that you need to be aware of when trying to convert condos as an investment. Hubstar Realty works with attorneys and contractors and can create a good investment plan to fit your needs. Our plans will outline the estimated costs and benefits from your investment. Every property is unique and it is important to have a good plan prior to starting your investment.