I recently listed a unique group of homes in the mid-county area which has six residences on a single parcel that occupies just under half an acre.
These include the original 3-bedroom farmhouse, plus two townhouse-style units and three single-level 2 bedroom houses, each of which has an attached 1-car garage that could be built out to expand their layouts to 3 bedrooms and 2 baths, along with a couple of outbuildings with potential to convert to ADU’s. And the nicest one of them, which has an extra half bath plus a detached guest quarters will be delivered vacant.
The price for the whole assemblage is $3,500,000, and the Seller will carry a note with 30% down payment for 10 years, with 6.5% interest only payments. If a buyer rented out the final house at market rate and managed the property themselves, this would immediately give them a better than break-even cash flow. The buyer can also add value by building out the garages and converting the two outbuildings to ADU’s, with an estimated $300,000 budget. Current market rental rates indicate that this would get the cash flow up to $50,000 or more.
But perhaps more interesting is the fact that it came up during the course of our due diligence in putting together the property information that some years ago, the current owner explored the idea of filing a tentative map and had a Tenancy In Common Agreement drafted by a well-known attorney to convert each of the residences to Tenancy In Common (TIC) interests, which would enable different parties to buy each of the homes for individual ownership. You can read more about this form of ownership at www.AndySirkin.com.
When you consider that small 2 bedroom townhomes in similar locations are selling for $700,000 and more, it appears that there could be a more substantial upside for someone who has enough saved up to buy the whole property and sell off the residences individually. In fact, there may be enough left over that you could retain one of the homes after selling off the other six and still have a little money left over.
Of course, it will take over $1 Million for someone to be able to take advantage of the opportunity, or perhaps several homebuyers who are weary of trying to find something affordable on the open market could pool their funds and each get a roof over their heads going in on it together and split the profits of the units that they decide to sell off.
In the world of investment, nothing is guaranteed, but it’s an interesting enough proposition that it may very well bear looking into further.
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