Forum
« Entryway marble saddle Antique French Doors - 2 Sets »
July 10, 2009
C of O for Rear House?
I'm looking seriously at buying a 2 family property in Prospect Heights, which includes a 3-story 2 Family in the front, and has a 2nd 2-story house in the back. While the back house is legally registered with the Dept. of Housing and Preservation, it's not listed on the C of O, and thus from what I've heard from brokers, it won't be used in the appraisers assessment of the value.
Based on this limited info, an appraiser allied with the broker I'm talking to thinks that the property will appraise for 950 - 1mil. The asking price is 1.2 million and the owner is firm - though would owner finance the portion of the price beyond what the bank will lend for the appraisal. So if the bank appraised at 950k, I would end up borrowing 250k directly from the owner.
Based on the projected rent roll (I would occupy and rent) for a 2 bedroom, plus a 3-bedroom duplex, plus a 3-bedroom standalone duplex house, I feel comfortable that I will be able to cover the mortgage (split between the bank mortgage and the owner financed mortgage. I'm concerned, however, about resale. Does anyone have any experience getting a standalone backyard structure added as an extra "family"? Can anyone recommend a contractor/architect/appraiser that I could discuss this with? I'm happy to pay to speak to someone or have them walk through.
To sum it up - I'm interested in how I could get a property zoned in such a way that it would be sure to appraise for enough money to cover a mortgage in the 1.2mil plus range.
Comments
it sounds like you are setting up a piggyback mortgage that puts you into 125%of the appraised value...not a good idea when rents are dropping and your rent roll may not meet expectations...bail out unless you earn enough to cover the bill w/ out the rent roll projected
Posted by: eman1234 at July 9, 2009 7:22 PM
just because the owner wont sell for less doesnt mean that you should buy.
Posted by: slick at July 9, 2009 11:18 PM
I'd think it would be very tricky to modify the C of O with regard to the backyard building.
That structure may be perfectly legal as an existing condition, if it was built prior to modern zoning. But the DoB considers it a non-compliant structure for any modifications, which makes an extra layer of hassle on top of any other approval/issues. I worked on a project in Staten Island a few years ago with a similar setup, with a rear building used as an artist's loft that the owner wanted to add a small half-bath to, the DoB wouldn't approve it on the basis that the half-bath increased the habitability of the building or some such nonsense.
Posted by: Smokychimp at July 10, 2009 1:01 PM
Be careful...you may wind up paying a much, much higher real estate tax bill. Are the current taxes in-line with other 2 family houses on the block that don't have an additional structure or do they already reflect the additional structure? What does the Depot of Finance say about it?
On the issue of financing it, if you can only afford it if the rents come in where you expect them to and you would have a problem if they were vacant for a few months, then you can't really afford it.
Posted by: daveinbedstuy at July 10, 2009 3:29 PM
The taxes are actually insanely low - under 1k per year because of an abatement.
I'd like to leave it 2-family while I own it to save on taxes, but was considering the possibility of converting it right before I sold, since I'll face the same problem when I sell: it won't appraise well, and if the lending climate is the same, it will be a difficult financing situation for a buyer.
Unlike the current owners, I probably won't be able to offer a buyer owner financing.
I'm not looking to flip it - but just want my outs covered and wanted to know what it would require to get it to a 3-family status so it would appraise for closer to its actual worth (which I realize is subjective).
Posted by: paddingtonbear at July 10, 2009 3:47 PM
Pbear... Give Brendan Coburn of Coburn Architects PC a call. He did the exact thing you're looking to do on St. Marks Avenue in Prospect Heights back in 2002 or so. Two story brick shell behind a three family, prior manufacturing C of O, and converted it into residential... Won some awards as well if I remember. The property just changed hands for 2.4 million by the way. Nice guy. Used to post on Brownstoner back in the day.
Posted by: IMBY at July 10, 2009 5:37 PM
Paddington,
Yes, that house is kind of nice if it's one I'm thinking of. It has parking, no?
I didn't quite love the fact that the yard is nearly or is entirely paved with granite "cobblestone"/"Belgian pavers". But I'm sure you can green it up.
Good luck with it but don't over pay now.
Posted by: BrooklynGreene at July 10, 2009 6:29 PM
oops...IMBY, I think I may have been thinking of the property that Brendan redid...
If THAT property went for "2-point-four", I doubt it the same one asking "1-point-2".
Have a good weekend!
Posted by: BrooklynGreene at July 10, 2009 6:32 PM
I bought a similar property in windsor terrance in 2003. Three story attached in the the front with three apartments, and a two story rear house on the same lot. There was a C of O for the front but nothing for the rear. Most rear houses in NYC predate C of O statutes. I had similar problem with the lender appraising the total rent roll without C of O. We insisted that the seller obtain a "letter of no objection" for the rear house from DOB which would serve as a C of O. It took them six months to get it, but we would not close without it. Properties with a rear house often represent good value on a square foot basis and can be improved to create an excellent rent roll and cap rate.
Posted by: Derekinwindsorterrace at July 11, 2009 5:41 PM
It is interesting that the owner is willing to offer financing. Why not take him up on it? That eliminates the problem with financing, doesn't it?
Posted by: Jumbo at July 12, 2009 8:50 AM
Yes, I intend to take him up on it - the question comes into play when I sell it - since I will likely not want to offer owner financing to whoever buys it.
This is all theoretical - and 5+ years down the line - but I need to consider it.
Posted by: paddingtonbear at July 12, 2009 3:38 PM
Someone on my block just bought such a building. Plus this person is an architect. I wish I had more information. I only know about it because we share the same broker. It is a long shot but you might try calling Boerum Hill Realty and ask for Al Barcelon. He may or may not be able to help you as he is a realtor himself but I know he worked on a similar sale.
Posted by: boroughbred at July 12, 2009 9:54 PM
Post a comment
Please be patient while your comment is published. It may take a moment.