The secret of a successful investor is in predicting income from his investments. The real estate market offers a ton of options that allow it to choose the most profitable scenarios. One of them is the transfer of one unit to the status of an apartment building. Why is it profitable and who uses such services is told by Dmitry Tsyplakov, CPO of Fincase .
The general economic situation in the world is far from the word “stability”, and, as many experts say, is supported by the real estate market. Is it profitable to invest in houses today?
The main fear of any real estate investor is not to get income from it. It is very difficult to predict whether tomorrow there will be demand for luxury homes with an area of 300 square meters and whether the middle class can afford a room. And this is not only because of the pandemic, rising unemployment and other things. Investing money in something is always a risk and you need to be ready to quickly find a solution and adapt to new conditions. For example, during a pandemic, self-isolation, switching to online mode, it is difficult to sell or lease a large object. But a single-family house can be turned into an apartment building, an office can be split into offers for a small business and thus find your potential client.
That is, “subdividing” a unit is a new trend?
Market conditions are dictated primarily by the consumer.
The middle class remains uncertain about their earnings and jobs. Some experts talk about the growing crisis, frightening people that they may not be able to pay their bills next year. Nevertheless, it is today for the middle class to buy their own home more than ever, thanks to the general mortgage rate of 3–4%, as well as the presence of all kinds of state and regional support programs. Representatives of this class approach the purchase prudently and understand that they cannot afford a huge house in the center of New York, but they will definitely pay attention to an apartment there in the same condominium. Statistics show that there is demand. In November 2020, the number of permits for the construction of such condominiums in the United States increased by 22.8%; construction has already begun by 0.8% more than last month.
The situation is approximately the same with business. Moving work to online mode does not replace the need to have a small office so that employees from time to time can focus on work away from family in order to hold a general meeting, receive mail, not to mention small retail outlets that somehow resume their work.
Such observations push investors to buy a large property with the aim of its subsequent division into small affordable offers. I would say that this is not a trend, but one of the options for working with real estate investment.
Can any object be converted into a multi-component?
Almost yes. There are three main categories of apartment buildings:
1. Residential. It implies the transfer of a house for single family to multi-family. These can be duplexes, or the development of one site with an apartment building. This can even include the organization of trailer parks.
In this category, there are certain restrictions on the number of buildings and the types of animals that can be accommodated in such residences.
2. Commercial: redevelopment of offices and shopping centers. It is important to follow the rules for placing types of business in relation to each other.
3. Mixed. When, for example, a minimarket , a cafe or a children’s leisure center is located on the ground floor of an apartment building . It is ideal for densely populated areas.
In the US, condominiums are especially popular. The most prestigious are in New York, Florida and California, as the former is the main business center and the latter two are the most popular resort areas. Nevertheless, condominiums located in remote areas are also in demand . For example, in Connecticut, there are several villages with two-story houses that are in demand.
What needs to be done to make such a transfer of real estate as safe as possible?
The first thing to do is to study the market conditions of the area in which the object is located. What is in demand, what business might be interested in your proposal and what exactly it needs to work. What category of people is considering proposals and what is important to them. The needs of young families with children and foreign students are completely different. So you will understand exactly what needs to be done with your object in order to get the greatest benefit.
As with any real estate investment, transferring to a multi-component property requires careful calculation. Look at rental rates and prices for similar offers to understand how much income you can expect. Make an estimate where you need to reflect the possible renovation and equipment of the premises, the costs of the team of lawyers and realtors , electricity bills and property registration. These numbers will give a clear picture of the profitability and profitability of the entire venture.
In addition, you need to study the municipal and zoning rules in your region. To be sure of exactly the implementation of the transformation plan.
After submission of documents for the section, together with a package of legal documents in the local jurisdiction, the object officially becomes a “condominium project”. Based on this, the investor needs to obtain a Declaration of Agreements, Conditions and Restrictions, create a separate title deed for each condominium. And only now you will be able to sell each property separately, and not as a whole.
More info about Fincase’s project on the website: https://f-case.ru/main-en
Dmitry Tsyplakov’s LinkedIn: https://www.linkedin.com/in/dmitrypm/
